The Herfindahl-Hirschman Index (HHI) is a measure of market concentration that calculates the sum of the squares of the market shares of all firms in a given market. It helps to determine the level of competition in an industry, with higher values indicating less competition and greater market power for individual firms. This index plays a crucial role in understanding pricing strategies, as firms in less competitive markets can exert more control over prices, potentially leading to higher prices for consumers.
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