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| 1 | Dean Liu | -- | 2312 | 2022-10-24 01:41:02 |
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The Herfindahl index (also known as Herfindahl–Hirschman Index, HHI, or sometimes HHI-score) is a measure of the size of firms in relation to the industry they are in and an indicator of the amount of competition among them. Named after economists Orris C. Herfindahl and Albert O. Hirschman, it is an economic concept widely applied in competition law, antitrust and also technology management. HHI is calculated by squaring the market share of each competing firm in the industry and then summing the resulting numbers,(sometimes limited to the 50 largest firms), where the market shares are expressed as fractions or points. The result is proportional to the average market share, weighted by market share. As such, it can range from 0 to 1.0, moving from a huge number of very small firms to a single monopolistic producer. Increases in the Herfindahl index generally indicate a decrease in competition and an increase of market power, whereas decreases indicate the opposite. Alternatively, if whole percentages are used, the index ranges from 0 to 10,000 "points". For example, an index of .25 is the same as 2,500 points. The major benefit of the Herfindahl index in relationship to such measures as the concentration ratio is that it gives more weight to larger firms. Other benefits of the Herfindahl index includes its simple calculation method and the small amount of easily obtainable data required for the calculation. The measure is essentially equivalent to the Simpson diversity index, which is a diversity index used in ecology; the inverse participation ratio (IPR) in physics; and the effective number of parties index in politics.
References
- 2010 Merger Guidelines § 5.3
- However, it gets far more complicated than that. See para. 16-21 Guidelines on horizontal mergers
- "Horizontal Merger Guidelines (08/19/2010)" (in en). 2015-06-25. https://www.justice.gov/atr/horizontal-merger-guidelines-08192010.
- "Horizontal Merger Guidelines (08/19/2010)" (in en). 2015-06-25. https://www.justice.gov/atr/horizontal-merger-guidelines-08192010.
- "Horizontal Merger Guidelines (08/19/2010)" (in en). 2015-06-25. https://www.justice.gov/atr/horizontal-merger-guidelines-08192010.
- "Horizontal Merger Guidelines (08/19/2010)". https://www.justice.gov/atr/public/guidelines/hmg-2010.html.
- "Horizontal Merger Guidelines (08/19/2010)" (in en). 2015-06-25. https://www.justice.gov/atr/horizontal-merger-guidelines-08192010.
- Hayes, Adam. "Herfindahl-Hirschman Index (HHI) Definition" (in en). https://www.investopedia.com/terms/h/hhi.asp.
- "Herfindahl–Hirschman Index". USDOJ. https://www.justice.gov/atr/public/guidelines/hhi.html.
- "Horizontal Merger Guidelines (08/19/2010)" (in en). 2015-06-25. https://www.justice.gov/atr/horizontal-merger-guidelines-08192010.
- Saxena, Nidhi (2011-04-26). "Herfindal Hirschman Index". Essays For Student.com. https://www.essaysforstudent.com/term-paper/Herfindal-Hirschman-Index/94112.html. "If all firms have equal share the reciprocal of the index shows the number of firms in the industry. When the firms have unequal share the reciprocal of the index indicates the equivalent number of firms in the industry"
- Viscusi, W. Kip; Harrington, Jr., Joseph E.; Vernon, John M. (2005). Economics of Regulation and Antitrust (4th ed.). Cambridge, MA: The MIT Press. pp. 159–161. ISBN 9780262220750. https://mitpress.mit.edu/books/economics-regulation-and-antitrust-fourth-edition.
- Lovett, William (1988). Banking and Financial Institutions Law in a Nutshell. West Publishing Co..
- Bouchaud, Jean-Philippe; Potters, Aguilar (1997). Missing Information and Asset Allocation.
- Woerheide, Walt; Persson, Don (1993). "An Index of Portfolio Diversification". Financial Services Review 2 (2): 73–85. doi:10.1016/1057-0810(92)90003-U. https://pdfs.semanticscholar.org/0a5e/ec924dae3ea30b6cae8e66f7070344d47631.pdf.
