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Concentration Measurement Under Cross-ownership: The Case of the Spanish Electricity Sector

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  • Javier Campos
  • Gilberto Vega

Abstract

When major investors own shares in several firms in the same industry, the traditional approach to concentration measurement by the Hirschman--Herfindahl Index (HHI) fails to accurately reflect the level of competition in the market. To address this problem we derive a generalized HHI formula (GHHI) based on the investors' degree of control over each firm. We test alternative definitions of this control with actual data from the Spanish electricity sector and show that recent decisions in this industry, particularly the failed merger between the largest firms, Endesa and Iberdrola, could have been affected had the GHHI been used by the competition agency.

Suggested Citation

  • Javier Campos & Gilberto Vega, 2003. "Concentration Measurement Under Cross-ownership: The Case of the Spanish Electricity Sector," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 313-335, December.
    • Handle: RePEc:kap:jincot:v:3:y:2003:i:4:p:313-335
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    References listed on IDEAS

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    2. Patricia Charléty & Marie-Cécile Fagart & Saïd Souam, 2009. "Incentives for Partial Acquisitions and Real Market Concentration," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 508-534, September.

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