Herfindahl-Hirschman Index (HHI)
European Union Electricity Market Glossary

 


 

 

The Herfindahl-Hirschman Index (HHI) measures the degree of concentration in a market.

 

In general, a high number of suppliers and low market concentration are seen as one of the indicators of a competitive market structure.

 

The HHI is calculated as the sum of the squares of the market shares of all firms in the market.

 

It ranges between 0, for an infinite number of small firms, and 10,000, for one firm with a 100% market share (CEER Draft Handbook on Harmonised definitions of retail market metrics, CEER Public Consultation Paper Ref: C16-SC-46-04 18-07-2016, p. 9, 10).

 

Market shares can be calculated on the basis of consumed volumes and number of customers or meter points.

 

Based on guidance from the European Commission (Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings (2004/C 31/03), an HHI above 2000 signifies a highly concentrated market.


The HHI should be calculated at least annually. In particular, its development over time should be assessed to understand whether the market structure becomes more or less competitive.

 

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Last Updated on Saturday, 06 August 2016 13:22
 

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