A concentration index for differentiated products: the case of religious competition

In the past, scholars have used a Herfindahl-Hirschman Index using denominational market shares to measure the competitiveness of religious markets. However, this approach ignores both the imperfect substitutability between denominations and the degree of competition within denominations. These two shortcomings make the current index a suspect measure of religious competition; it often falsely identifies which market micro-economists would generally consider the more competitive one. We develop a new religious competition index that incorporates intra-denominational competition and creates a 'substitutability parameter' to better specify the appropriate degree of inter-denominational competition. While the model developed in this article applies specifically to religious markets, our index of competition could be expanded to other economic markets where such a substitutability parameter is meaningful.