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Herfindahl-Hirschman Index |
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Herfindahl-Hirschman Index An index of market concentration the U.S. Department of Justice uses to determine whether a monopoly is forming. The scale goes from zero to 10,000, with 10,000 indicating that a single company controls 100% of the market share in a given industry. An HHI of less than 1000 indicates a market with little concentration, which the Justice Department prefers. Any merger or acquisition leading to an increase of more than 100 when the HHI was previously greater than 1,800 may lead to antitrust action against the company involved. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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This is done by using the Herfindahl-Hirschman Index (HHI; see sidebar, page 64), which is calculated by squaring the percentage of the market share of each company in a specific industry, then summing the squares. Under the merger guidelines, determination of monopoly power requires a two-step process: The market is defined and then a formula which uses market-share data, the Herfindahl-Hirschman Index, is used to determine market concentration. Ultimately, however, the FTC staff was bound by precedent to apply the Herfindahl-Hirschman Index, a formula the FTC uses to assess market concentration," said Greehey. |
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