The use of the Herfindahl-Hirschman Index (HHI) to measure market concentration is encouraged for banks because of the ease of separating banks from thrifts and insurance companies.

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The Herfindahl-Hirschman Index (HHI) is used to measure market concentration, but the ease of separating banks from thrifts and insurance companies is not the primary reason for its use. The HHI is valued for its ability to quantify the level of competition within an industry by considering the size of companies relative to the industry as a whole.

The Use of the Herfindahl-Hirschman Index (HHI) to Measure Market