Intuition
When all the firms in an industry have equal market shares, H = 1/N. The Herfindahl is correlated with the number of firms in an industry because its lower bound when there are N firms is 1/N. An industry with 3 firms cannot have a lower Herfindahl than an industry with 20 firms when firms have equal market shares. But as market shares of the 20-firm industry diverge from equality the Herfindahl can exceed that of the equal-market-share 3-firm industry (e.g., if one firm has 81% of the market and the remaining 19 have 1% each H=0.658). A higher Herfindahl signifies a less competitive industry.
Read more about this topic: Herfindahl Index
Famous quotes containing the word intuition:
“When a scientist is ahead of his times, it is often through misunderstanding of current, rather than intuition of future truth. In science there is never any error so gross that it won’t one day, from some perspective, appear prophetic.”
—Jean Rostand (1894–1977)
“Well, intuition isn’t much help in police work. Facts are what we need.”
—Crane Wilbur (1889–1973)
“Reason is sight. Instinct is touch. Intuition is smell.”
—Mason Cooley (b. 1927)