Herfindahl-Hirschman Index (HHI)
The Herfindahl–Hirschman Index (HHI) is a measure of market concentration used to assess competition within an industry. It is calculated by squaring the market share percentages of all companies in that market and then summing those squares. Higher HHI values indicate less competition and more market power held by a few firms, while lower values suggest a more competitive market with many players. Regulators often use the HHI to evaluate mergers and acquisitions, assessing whether they might reduce competition and harm consumers.
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The Herfindahl-Hirschman Index (HHI) is a measure used to evaluate the concentration of market power within an industry. It is calculated by squaring the market share of each company in the market and then summing these values. The result ranges from 0 to 10,000; lower scores indicate a competitive market with many small players, while higher scores suggest less competition, with a few companies dominating. Regulators often use HHI to assess potential mergers and acquisitions, ensuring they don’t lead to excessive market concentration that could harm consumers.