Market attention refers to what volume the corporations have their proportion withinside the marketplace. Whenever the marketplace attention increases, it way that few corporations are gaining energy withinside the marketplace in comparison to the scenario whilst marketplace attention decreases whilst the surroundings stays competitive.
The required details about Herfindahl-Hirschman Index is mentioned in below paragraph.
The Herfindahl-Hirschman Index for Industry A is decrease than Industry B, indicating that Industry A is much less focused than Industry B. Considering Herfindahl-Hirschman Index, as 2500 is much less than 5200, it shows that during Industry A, the 4 corporations have a tendency to compete with every other. But in Industry B, one of the corporations has a big proportion, in order that company has a tendency to dominate the marketplace in comparison to the opposite 3 small corporations.
The given announcement is false
Reason: The Herfindahl-Hirschman Index allows in indicating whether or not the marketplace is particularly focused or not, and Herfindahl-Hirschman Index for each Industry A and B are calculated below:
Herfindahl−HirschmanIndex=(ShareofFirm1)2+(ShareofFirm2)2+(ShareofFirm3)2+(ShareofFirm4)2ForIndustryA,Herfindahl−HirschmanIndex=(25)2+(25)2+(25)2+(25)2=625+625+625+625=2500ForIndustryB,Herfindahl−HirschmanIndex=(70)2+(10)2+(10)2+(10)2=4900+100+100+100=5200" role="presentation" style=Herfindahl−HirschmanIndex=(25)2+(25)2+(25)2+(25)2=625+625+625+625=2500ForIndustryB,Herfindahl−HirschmanIndex=(70)2+(10)2+(10)2+(10)2=4900+100+100+100=5200 Herfindahl−HirschmanIndex=(ShareofFirm1)2+(ShareofFirm2)2+(ShareofFirm3)2+(ShareofFirm4)2ForIndustryA,Herfindahl−HirschmanIndex=(25)2+(25)2+(25)2+(25)2=625+625+625+625=2500ForIndustryB,Herfindahl−HirschmanIndex=(70)2+(10)2+(10)2+(10)2=4900+100+100+100=5200
(COMPLETE QUESTION)
Industry A has four firms, each with a 25% market share. Industry B has four firms, one firm with a 70% market share and the other three firms with 10% each. According to the Herfindahl-Hirschman Index, industry A is more highly concentrated. Is this statement true or false? Explain.
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