The HHI is crucial in assessing the competitive landscape of an industry. Regulators and businesses use HHI for various purposes, including:
Merger analysis: Regulators often use HHI to evaluate the potential impact of mergers and acquisitions on market concentration. A significant increase in HHI post-merger may indicate reduced competition. Antitrust investigations: High HHI values can trigger antitrust scrutiny to ensure no single firm can dominate the market and restrict competition. Market strategy: Firms use HHI to gauge the level of competition and devise strategies to enhance their market share or enter new markets.