HHI, an irrelevant indicator without a relevant market

Summary. For evaluating the concentration effects of horizontal unbundling or mergers in the electricity industry a one-number-indicator is desirable. But, the three most widely applied measures (HHI, PSI and RSI) are per se unable to represent changing sizes of the relevant market due to occasional congestion as they often occur in electricity markets. This paper proposes an adjusted HHI taking into account wider-then-national markets as well as time varying degrees of international competitive pressure. The corresponding adjusted HHI for the French market is 3200 and thus significantly below the HHI of the pure national market (6500).

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