Answer:
Both rise
Explanation:
The Herfindahl index is calculated by squaring the market share of firms and then adding it.
The four firm concentration ratio = 0.2^2 × 4 = 0.16
If A and F merges, their market share becomes 20%+10%=30%
The four firm Herfindahl index = 0.3^2 +( 0.2^2 × 3) = 0.12 + 0.09 = 0.21
The concentration ratio before the merger = 20% x 4 = 80%
After the merger it becomes (30 + 20 + 20 + 20) = 90%
From the calculations, they both increase
I hope my answer helps you
