Herfindahl-Hirschman Index


When market share is calculated nationwide, it seems unlikely that consumers would suffer from monopolistic practices. The problems of defining an industry or sector can work the other way round as well. Fascism, political ideology and mass movement that dominated many parts of central, southern, and eastern…. She has written extensively for publications and websites in the business, management and legal fields. ARK Disrupt Issue

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In little more than 10 years, the number of motor vehicles surpassed the horse and mule population. ARK anticipates a pattern associated with technological enabled disruption in the auto market during the next few years.

We think autonomous electric vehicles are likely to take significant market share from vehicles powered by the Internal Combustion Engine ICE. ARK believes car owners are unlikely to abandon their ICE-based vehicles right away, but at some point during the next five to ten years, EVs will account for most of the increase in auto sales while ICE vehicles depreciate to their logical end.

As usual in this kind of transformation, disruptive technology takes nearly all of incremental sales and the legacy technology is utilized for the remainder of its useful life. In , more than 4, horse-drawn carriage companies operated in the U. To put the automotive industry into perspective, one can examine the Herfindahl-Hirschman Index HHI , a measure of market concentration.

Just as the moving assembly line transformed auto manufacturing roughly years ago, we think EVs have the potential to do the same today. ARK thinks adding autonomous capability to the mix of vehicles is likely to cause a significant acceleration in the market and the automotive consolidation.

Finance , the process of raising funds or capital for any kind of expenditure. Consumers, business firms, and governments often do not have the funds available to make expenditures, pay their debts, or complete other transactions and must borrow or sell equity to obtain the money they need to conduct their…. Competition , in ecology, utilization of the same resources by organisms of the same or of different species living together in a community, when the resources are not sufficient to fill the needs of all the organisms.

Within a species, either all members obtain part of a necessary resource such as food…. Monopoly and competition, basic factors in the structure of economic markets. In economics monopoly and competition signify certain complex relations among firms in an industry.

A monopoly implies an exclusive possession of a market by a supplier of a product or a service for which there is no…. Help us improve this article! Contact our editors with your feedback. You may find it helpful to search within the site to see how similar or related subjects are covered. Any text you add should be original, not copied from other sources. At the bottom of the article, feel free to list any sources that support your changes, so that we can fully understand their context.

Internet URLs are the best. Thank You for Your Contribution! The purpose of the Herfindahl Index is to assess the relative or comparative size of the major companies in a particular industry or market. The Herfindahl Index takes into account a number of factors that give analysts and experts a better, more comprehensive view of the health of a specific market. When that market is populated by a lot of big companies, all of them relatively the same size, the index will be at or near zero.

On the other hand, if a specific industry or market is dominated by a single company, the index will be dramatically bigger. The index is inversely proportionate to the number of companies in that market. It's also inversely proportionate to the difference in size between those companies. This means that the closer a market is a true monopoly, the larger that firm's market share would be. For example, let's assume a specific industry only has a single viable business, Smith Inc.

As a result, its HI would be 10, Let's assume the opposite scenario. If an industry has thousands of companies, each of them roughly the same size, the HI would be close to zero. An HI score close to zero would indicate a market that's enjoying a nearly ideal state of competition.

The risk of a monopoly like the HI would be nearly zero. Of course, there's a lot of room in between these two extreme examples. Department of Justice, in analyzing potential monopoly and antitrust cases, considers any market with a Herfindahl Index lower than 1, to be in a state of healthy competition.