
What does the Herfindahl–Hirschman Index (HHI) measure in market structure analysis?
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Get StartedWhat does the Herfindahl–Hirschman Index (HHI) measure in market structure analysis?
Options:
- Market concentration calculated as the sum of squared market shares of all firms
- The number of firms in a market without weighting by size
- Average firm profitability across an industry
- The variance of prices charged by competing firms
Correct answer: Market concentration calculated as the sum of squared market shares of all firms
Explanation: HHI sums squared market shares to measure concentration; U.S. merger guidelines treat markets with HHI above 2,500 as highly concentrated, a concrete DOJ/FTC threshold used in antitrust review.
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