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:
“All appeared new, and strange at first, inexpressibly rare and delightful and beautiful. I was a little stranger, which at my entrance into the world was saluted and surrounded with innumerable joys. My knowledge was divine. I knew by intuition those things which since my Apostasy, I collected again by the highest reason.”
—Thomas Traherne (1636–1674)
“Reason is sight. Instinct is touch. Intuition is smell.”
—Mason Cooley (b. 1927)
“Well, intuition isn’t much help in police work. Facts are what we need.”
—Crane Wilbur (1889–1973)