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27 Antitrust Bull. 285 (1982)
Using the Herfindahl Index to Measure Concentration

handle is hein.journals/antibull27 and id is 291 raw text is: The Antitrust Bulletin/Summer 1982 Using the Herfindahl Index to measure concentration BY DAVID S. WEINSTOCK* For many years, the top four (CR4') analysis has been the most widely accepted method for determining the degree of concentra- tion in a market. However, the CR4 approach has two significant drawbacks. First, it does not take account of the relative sizes of the four leading companies. Thus, a market in which each of the four largest firms has 20°7 of the market will show the same degree of concentration as another market in which the top four firms have shares of 55%, 20076, 4%, and 1%, respectively. In each case, the ratio will be 8000. But, four equal-size firms may compete with each other differently than four firms of disparate size. The second problem with the CR4 analysis is that it does not take into account the total number of firms in the market, nor the market shares of the companies below the four largest. * Member, New York Bar. I CR4 is an abbreviation for Concentration Ratio for the Top 4 Firms. Similarly, CRX refers to the concentration ratio for the top X firms; CR alone will be used to indicate the general method employed in this measure, i.e., adding the market shares of the larger firms in a market. CR analysis refers to an analysis of concentration of a market using a CR approach. © 1982 by Federal Legal Publications, Inc.

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