Question

6

In 2014 Tim Hortons and Burger King merged at a value of $12 billion. The Competition Bureau would want to analyze this market to decide if there would be too much market concentration post-merger. In order to find a value for the Herfindahl-Hirschman Index the antitrust economists would need to determine the relevant market. Explain how they would do this.

Answer 1

To calculate HHI index .

We first need to determine the share of each firms in the market .

Then we need to use the following formula to determine HHI.

HHI=10,000*{[(x1)^2+(x2)^2+(x3)^2......(xn)^2]}

,Where x1 is share of total market of firm 1 , an x2 is share of total market of firm 2 and so on.

For example,

If there are two firms ,in the market .one with 60% share and second with 40% of total market.

Then ,HHI=10,000{[(0.6)^2+(0.4)^2]}=10,000*{[0.36+0.16)=10,000{[0.52]}=5200