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Some notes on applying the Herfindahl--Hirschman Index

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Listed:
  • Akio Matsumoto
  • Ugo Merlone
  • Ferenc Szidarovszky

Abstract

The Herfindahl--Hirschman Index is one of the most commonly used indicators to detect anticompetitive behaviour in industries. In fact, an increase in the value of the index is usually interpreted as an indicator of actions which may lessen competition or even create a monopoly. In this article we show that this is not always the case, since in certain instances it is impossible to detect cooperation. We also show an example when competition even has a decreasing effect on the value of the index.

Suggested Citation

  • Akio Matsumoto & Ugo Merlone & Ferenc Szidarovszky, 2012. "Some notes on applying the Herfindahl--Hirschman Index," Applied Economics Letters, Taylor & Francis Journals, vol. 19(2), pages 181-184, February.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:2:p:181-184
    DOI: 10.1080/13504851.2011.570705
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    1. Robert H. Porter & J. Douglas Zona, 1999. "Ohio School Milk Markets: An Analysis of Bidding," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 263-288, Summer.
    2. Severin Borenstein & James Bushnell & Christopher R. Knittel, 1999. "Market Power in Electricity Markets: Beyond Concentration Measures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 65-88.
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