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The CR4 index and the interval estimation of the Herfindahl-Hirschman Index: an empirical comparison

Author

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  • Maurizio Naldi

    (Università degli Studi di Roma Tor Vergata [Roma] = University of Rome Tor Vergata)

  • Marta Flamini

    (Università Telematica Internazionale UNINETTUNO - Università Telematica Internazionale UNINETTUNO - Università Telematica Internazionale UNINETTUNO)

Abstract

Concentration indices are employed to measure the level of competition within an industry. Among the several indices proposed in the literature, the Herfindahl-Hirschman Index (HHI) and the Four-firm concentration ratio (CR4) are among the most established. However, the HHI requires the market shares of all market players to be known, while the CR4 requires just the top four. In order to investigate whether we can always use the CR4 in place of the HHI, we have compared the indices resulting from a selected group of datasets. This preliminary analysis shows that the relationship between the CR4 and the HHI may not be monotonic, so that the CR4 does not preserve the order relationship established through the HHI.

Suggested Citation

  • Maurizio Naldi & Marta Flamini, 2014. "The CR4 index and the interval estimation of the Herfindahl-Hirschman Index: an empirical comparison," Working Papers hal-01008144, HAL.
    • Handle: RePEc:hal:wpaper:hal-01008144
    Note: View the original document on HAL open archive server: https://hal.science/hal-01008144
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    References listed on IDEAS

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    2. Sossdorf, Fernando, 2022. "Winners take all (the most): The effects of market concentration on labor share and wage inequality," MPRA Paper 113642, University Library of Munich, Germany.
    3. Dariusz Filip & Tomasz Miziołek, 2019. "Market Concentration in the Polish Investment Fund Industry," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 53-78.
    4. Mayank JAIN, 2023. "Disentangling the Concentration-Performance Nexus: An Empirical Study of Indian-Listed Firms Across Diverse Industries," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(4), pages 59-72, April.
    5. Zionam E. L. Rolim & Rafael R. de Oliveira & H'elio M. de Oliveira, 2019. "Industrial Concentration of the Brazilian Automobile Market and Positioning in the World Market," Papers 1908.09686, arXiv.org.
    6. Viviana Fernandez, 2021. "Cross-country concentration and specialization of mining inventions," Scientometrics, Springer;Akadémiai Kiadó, vol. 126(8), pages 6715-6759, August.
    7. Zdeňka Žáková Kroupová & Gabriela Trnková & Monika Roman, 2022. "Is Market Power or Efficiency behind Economic Performance? The Case of the Czech Food Processing Industry," Economies, MDPI, vol. 10(9), pages 1-22, September.
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    10. Jindřich Špička, 2016. "Market Concentration and Profitability of the Grocery Retailers in Central Europe," Central European Business Review, Prague University of Economics and Business, vol. 2016(3), pages 5-24.

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    Keywords

    Concentration indices; Competition; Herfindahl-Hirschman Index (HHI); Four-firm concentration ratio;
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