Table of Contents
What does a high HHI mean?
Herfindahl-Hirschman Index
The Herfindahl-Hirschman Index (HHI) is used to determine market competitiveness. A market with an HHI of less than 1,500 is considered a competitive marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and an HHI of 2,500 or greater is highly concentrated.
Is a high HHI good?
The HHI value can range anywhere from near 0 up to 10,000. A higher index value means that the industry is considered to be closer to monopoly conditions. Generally, a market with an HHI value of under 1,000 is considered to be competitive.
What does HHI stand for?
HHI
| Acronym | Definition |
|---|---|
| HHI | Hilton Head Island |
| HHI | Hardware and Home Improvement (various organizations) |
| HHI | Herfindahl-Hirschman Index (measure of market concentration) |
| HHI | Household Income |
What is the highest possible HHI?
The largest HHI possible is the case of monopoly, where one firm has 100\% of the market; the index is 1002, or 10,000. An industry with two firms, each with 50\% of total output, has an HHI of 5,000 (502 + 502).
How does the HHI work?
The term “HHI” means the Herfindahl–Hirschman Index, a commonly accepted measure of market concentration. The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. The HHI takes into account the relative size distribution of the firms in a market.
What does a low HHI mean?
The Herfindahl-Hirschman Index is an index that measures the market concentration of an industry. A low degree of concentration means that the industry is closer to a perfect competition scenario, where many firms of more or less equal size share the market.
How is HHI calculated?
The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 202 = 2,600).
How do you identify an oligopoly?
Oligopolies may be identified using concentration ratios, which measure the proportion of total market share controlled by a given number of firms. When there is a high concentration ratio in an industry, economists tend to identify the industry as an oligopoly.
Can HHI be a decimal?
This means that after the merge of company B and company C, the market is highly concentrated. Please note that, in some conventions, the value of the HHI index is expressed as a decimal – our examples would be 0.2286 and 0.3166 respectively.
What does one mean by oligopoly?
An oligopoly is a market characterized by a small number of firms who realize they are interdependent in their pricing and output policies. The number of firms is small enough to give each firm some market power.
What are the 5 characteristics of an oligopoly?
Its main characteristics are discussed as follows:
- Interdependence:
- Advertising:
- Group Behaviour:
- Competition:
- Barriers to Entry of Firms:
- Lack of Uniformity:
- Existence of Price Rigidity:
- No Unique Pattern of Pricing Behaviour:
What is a high-income index (HHI)?
According to the U.S. Department of Justice, an HHI of less than 1,500 represents an industry with low market concentration. An HHI ranging between 1,500 and 2,500 represents moderate concentration. HHI values of more than 2,500 represent a highly concentrated industry. The graphic below illustrates this classification:
How do you calculate the HHI of a company?
The HHI is calculated by taking the market share of each firm in the industry, squaring them, and summing the result, as depicted in the equation above. Consider the following hypothetical industry with four total firms: Firm one market share = 40\%. Firm two market share = 30\%.
What is the Herfindahl-Hirschman Index (HHI)?
What is the Herfindahl-Hirschman Index (HHI)? The Herfindahl-Hirschman Index is an index that measures the market concentration of an industry. A highly concentrated industry is one where only a few players in the industry hold a large percentage of the market share, leading to a near- monopolistic
What is a good HHI for a company?
According to the U.S. Department of Justice, an HHI of less than 1,500 represents an industry with low market concentration. An HHI ranging between 1,500 and 2,500 represents moderate concentration. HHI values of more than 2,500 represent a highly concentrated industry.