Herfindahl 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.
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Fig. 83 Herfindahl index. The Herfindahl index (H) is the sum of the squared firm sizes, all measured as a proportion of total market size. In the figure, for market A, H = (0.12)2 X 5 + (0.08)2X 5 = 0.104. If all firms in the market are the same size, then the value of the index is equal to the reciprocal of the number of firms; thus, if there are 10 firms all of the same size, H = 0.1. The upper limit of the index is 1, which occurs when there is a monopoly. The figure shows that market B (H = 0.190), with a single dominant firm, is almost twice as concentrated as market A, despite the latter having fewer firms.

Herfindahl index

a measure of the degree of SELLER CONCENTRATION in a MARKET that takes into account the total number of firms in the market and their relative size distribution (share of total market output). See CONCENTRATION MARKET.
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Herfindahl index is calculated as the sum of squares of the financial market shares of all Compustat firms in the Fama-French (1997) 48-industry classification.
Comparing an industry's selling intensity with the degree to which it is dominated by a few firms, as measured by the Herfindahl index, does not indicate a systematic relationship between the two measures across industries, suggesting that the story of customer capital is distinct from the story of market power (Figure 3).
They use a standard index of market concentration, the Herfindahl Index, to identify geographic regions where nonselective schools face comparatively less competition.
The Herfindahl index takes on smaller values when the distribution of activity is equal across all industries.
Besides, for robustness of results, ownership concentration is also measured by the annual Herfindahl index for each firm-year observation, corresponding to the sum of squares of stocks held by each of the five main shareholders as done in previous works (MAURY; PAJUSTE, 2005; CRISOSTOMO; LOPEZ-ITURRIAGA; VALLELADO, 2014).
Based on empirical evidence on the manufacturing sector, Bailie and Boyle (1971) pointed out that the four-firm concentration index is strongly correlated with all the variants of the Herfindahl Index.
Also, the report maps the competition in each region using the Herfindahl index.
To test the impact of diversification on reinsurance usage, we use the Herfindahl index to measure business and geographic concentration.
The most commonly used index of market concentration is the Herfindahl index (see for example Fungacova and Poghosyan 2011; Beck et al.
In the second workshop (in Philippines as APEC host economy of SOM, on August, 2015), experts in economic regulation will share their knowledge and experiences in the use of methods like Cost-Benefit Analysis; and Methodologies like Compensating variation, Herfindahl index, among others.
Herfindahl index gives a weight depending on the exposure to the counterparties.
frame and speaker diversity and an adaptation of the Herfindahl index, which measures market concentration), as well as various types of criticism and news images.