Final answer:
The HHI measure is used to assess the concentration or competitiveness of an industry. It is calculated by summing the squares of the market shares of all firms in the industry. Higher HHI values indicate greater concentration and potentially less competition, while lower values suggest a more competitive market.
Step-by-step explanation:
The HHI measure is used to assess the concentration or competitiveness of an industry. It is often used in economics to analyze market structures and understand the level of market power exercised by firms in an industry.
HHI stands for Herfindahl-Hirschman Index, and it is calculated by summing the squares of the market shares of all firms in the industry. Higher HHI values indicate greater concentration and potentially less competition, while lower values suggest a more competitive market.
For example, if an industry has a few dominant firms with high market shares, the HHI value will be high. On the other hand, if an industry has numerous small firms with relatively equal market shares, the HHI value will be low.