Herfindahl-Hirschman Index

CFA Level I
#1

In order to calculate you take the market share of each firm and square it and add them up all together right? What is the factor that you multiply by? 10,000?

#2

hey Chuck. it’s the sum of the first 50 firms’ market share squared. a monopoly would be one firm having 100% market share: 100^2 = 10,000 any additional firms would generate results lower than 10,000 got it?

#3

just square each company’s market share and sum them. If you imagine there is only one company in a monopoly that company would have 100% of the market share, so 10,000 is the max possible 100 * 100 = 10,000 Typically any industry with a HH index over 1800 is considered non-competitive

#4
  1. Take the percentage concentration 2, Square it up 3. Repeat 1 and 2 for the respective firms 4. Sum them up 10000 Monopoly >=1800 Oligopoly 1000=
#5

Gotcha. Thanks

#6

keelim: your ranges are off. look at page 112 in the textbook. HHI ranges: perfect competition: <100 monopolistic competition: 101-999 oligopoly: >1000 monopoly: 10000 glad this question was up. i was too lazy to memorize the table…

#7

Thanks man. I forgotten where I got the number. But I think I will stick with pg 110.

#8

i was confused by it as well when i read the section. that’s why i got lazy and didn’t really wanna memorize it precisely. but after this thread, i’m just going to memorize the table.