Title: The Herfindahl index and concentration ratios revisited
Authors: Sleuwaegen, Leo ×
De Bondt, Raymond
Dehandschutter, WV #
Issue Date: 1989
Series Title: Antitrust Bulletin vol:34 issue:3 pages:625-640
Abstract: One issue of long standing in both economics and antitrust practice concerns the correct and workable measurement of market power. Market power is intrinsically difficult to measure empirically, if only because it is related to both structural and behavioral characteristics of the industry, which in turn, may be related to each other. In addition, nontrivial problems arise if measures of market power are related to some attributes of economic welfare, such as allocative efficiency. In 1982 and 1984, modifications of the US Justice Department's Merger Guidelines included a shift from the simple and intuitively 'clear' 4-firm concentration ratio, which equals the total market share of the 4 largest suppliers, to the somewhat more sophisticated Herfindahl (H) index, which equals a weighted average of all of the 'relevant' firms' market shares, with each market share given a weight to its own value. Data analysis has revealed a horn-shaped relationship between the H index and concentration ratios, with several characteristics that can contribute to a better understanding of these measures
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Department of Managerial Economics, Strategy and Innovation (MSI), Leuven
× corresponding author
# (joint) last author

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