Herfindahl-Hirschman index (HHI)

Definition

An index that identifies the level of competition in a given market and helps the U.S. Department of Justice evaluate whether a merger might create a near-monopoly. The degree of concentration is defined as the market share (percentage of the market) controlled by each firm involved in a given market. First, the market share of each firm is squared. Then the sums of all the squares are added together to find the level of market concentration. A Herfindahl-Hirschman index of 1800 or more is generally considered a highly concentrated market.
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