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Herfindahl-Hirschman Index (HHI)

Definition:

A measure of market concentration, it depends on the number of firms and their size relative to the market. It is calculated by summing up the squares of market shares of each firm. For example, a market where the HHI comes to more than 1800 will be considered a concentrated market. Mergers or acquisitions that change the HHI by more than 100 points in a concentrated market may raise antitrust concerns within the Department of Justice.

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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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