15.9 Herfindahl index of market concentration One way of measuring market concentration is through the use of the Herfindahl index, which is defined as H ¼ Xn i¼1 s

2 i , where st ¼ qi/Q is firm i’s market share. The higher is H, the more concentrated the industry is said to be. Intuitively, more concentrated markets are thought to be less competitive because dominant firms in concentrated markets face little competitive pressure. We will assess the validity of this intuition using several models.