Cognitive Scaffold

Preparing your thinking workspace

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MENTAL MODEL · M5002

HHI

HHI
BusinessHigh supportEconomics
Included
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

An indicator that measures market concentration. It is calculated by summing the squares of the market shares of all firms in an industry. The higher the value, the higher the degree of monopoly and the weaker the competition.

SCAFFOLDING EFFECT

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Reduce cognitive load

A health check for the competitive landscape. Before entering a market, calculate the HHI first. If it is a high-HHI market (duopoly or monopoly), entrepreneurial opportunities are minimal; if it is a low-HHI market (atomistic competition), it implies huge integration opportunities.

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The Herfindahl-Hirschman Index (HHI) is a market concentration indicator: the sum of the squares of the market share percentages of each firm. The higher the value, the more concentrated (approaching monopoly), and it is commonly used in antitrust review to measure the degree of competition.

MINIMUM ACTION

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Source support: Explicit

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