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On the Concept of Market Concentration, the Minimum Herfindahl-Hirschman Index, and Its Practical Application

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  • Algirdas Krivka

Abstract

The paper analyses the phenomenon of market concentration in the context of the most popular industrial organization approaches: the struc- ture-conduct-performance (SCP) approach and the efficiency hypothesis (EH). The theory of market concentration evaluation is briefly presented, followed by an analysis of the main concentration indicators and their application in recent empirical research. The main problem in the practical application of the Herfindahl-Hirschman index (HHI) – the necessity to incorporate the market shares of all the enterprises in the market – is further addressed and the issue of calculating the minimum value of the HHI is analysed from the theoretical point of view and by modelling hypothetical markets. Key words: Market structure, Market concentration, Herfindahl-Hirschman index (HHI).JEL: D21, D22, D40, D42, D43, D47.

Suggested Citation

  • Algirdas Krivka, 2016. "On the Concept of Market Concentration, the Minimum Herfindahl-Hirschman Index, and Its Practical Application," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 63(5), pages 525-540.
    • Handle: RePEc:voj:journl:v:63:y:2016:i:5:p:525-540:id:2
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    More about this item

    Keywords

    Market structure; Market concentration; Herfindahl-Hirschman index (HHI);
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design

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