Economics Oligopoly Questions
The Herfindahl-Hirschman Index (HHI) is a measure of market concentration in an industry. It is calculated by summing the squared market shares of all firms in the market. The HHI ranges from 0 to 10,000, with higher values indicating greater market concentration.
To measure market concentration, the HHI is used to assess the degree of competition or monopoly power in an industry. A higher HHI suggests a more concentrated market with fewer competitors, while a lower HHI indicates a more competitive market with a larger number of firms.
The HHI is commonly used by antitrust authorities and regulators to evaluate mergers and acquisitions. If a merger or acquisition results in a significant increase in the HHI, it may indicate a potential reduction in competition and raise concerns about market power.