# Herfindahl Index

## Definitions

### Economics

- noun (written asan index developed by the US
*Herfindahl index*)__economist__Orris Herfindahl (1918–1972), used to calculate the dominance of a market by a small number of firms. The index is a simple way of calculating market concerntration, by calculating the market share of various firms, then squaring it and summing the squares. It gives the number of firms in the market and the relative size of each. It was subsequently further refined to form the Herfindahl-Hirschmann index.

### Health Economics

The Herfindahl index is a measure of the degree to which an industry is concentrated and is the sum of the squares of each firm's market share. The formula for the index (

*H*) is:*H = S*_{n}f^{2}_{n}Where f

_{n}is the market share of the*n*th firm. It has a maximum value of 100^{2}= 10000 (which indicates a monopoly) and a minimum value of zero. It is sometimes also termed the Herfindahl-Hirschman Index.