Concentration is a characterization of the size distribution and quantity of competing firms within a specific market or industry. The most common concentration measures are the Herfindahl index and the n-firm concentration rate. The Herfindahl index is the sum of the squared market shares of all the firms in a market, whereas the n-firm concentration rate is the sum of the market shares of the n biggest firms. These measures are a significant reflection of the underlying degree of competitiveness, but are sensitive to the adopted market definition, and must be interpreted carefully depending on the specifics of the case.
KeywordsGini coefficient Herfindahl index Lerner index Market definition Market structure
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