# Herfindahl-Hirschman Index

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?

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?

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

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=

Gotcha. Thanks

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…

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

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.