The Herfindahl-Hirschman Index is a measure of industry concentration used by U.S. antitrust regulators in determining whether to accept or reject a proposed merger.

Question

Quizplus · Accepted Answer

This statement is true. The Herfindahl-Hirschman Index (HHI) is a widely used tool for measuring market concentration and is used by antitrust regulators to assess the competitive effects of mergers and acquisitions. The HHI is calculated by squaring the market share of each firm in the industry and adding up the resulting values. The resulting score ranges from close to zero for a highly competitive industry to 10,000 for a monopoly. The higher the score, the greater the market concentration and the less competition there is likely to be. Antitrust regulators typically view an HHI score above 2,500 as indicating significant market concentration and a potential for anticompetitive effects.

The Herfindahl-Hirschman Index Is a Measure of Industry Concentration Used