ABSTRACT
Several measures of concentration have been devised to determine how the proportions of firms are spread in a market, amongst which are the concentration ratios, the Herfindahl-Hirschman index (HHI), the rank correlation coefficient, and the Hymer-Pashigian index (HPI). The concentration ratio measures the percentage of a market accounted for by the market's n largest firms, where n is an arbitrary selected number that is taken to be 3, 4, 8, or 10. This chapter proposes modifications to the HHI and Horvath index (HI) to deal with cases where few data are available other than the largest market shares. A way by which the suitability of the market definition can be tested is to examine if it allows for a positive cross-elasticity of demand and supply. The chapter discusses the theoretical exposition of monopoly power, and it explains an application of the theory.
