Herfindahl Index
A measure of market concentration, used to assess the level of competition within an industry.
Implications
A measure of market concentration used to assess the level of competition within an industry, calculated by summing the squares of the market shares of all firms in the industry, with higher values indicating less competition and more market concentration.
Example
Example: A government regulator uses the Herfindahl Index to assess the competitiveness of the telecom industry, finding that a high index value indicates potential monopoly power, prompting further investigation.
Related Terms
Different from simple market share analysis, which looks at individual firms, the Herfindahl Index provides an aggregate measure of how concentrated or competitive an entire industry is.
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