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Concentration measurement under cross-ownership. An application to the Spanish electricity sector

Author

Listed:
  • Gilberto Vega

    (University of Las Palmas de Gran Canaria)

  • Javier Campos

    (University of Las Palmas de Gran Canaria)

Abstract

When major investors own shares in several firms in the same industry, the traditional approach to concentration measurement by the Hirschman-Herfindahl Index (HHI) fails to accurately reflect the level of competition in the market. To address this problem we derive a generalized HHI formula (GHHI) based on the investors' degree of control over each firm. We test alternative definitions of this control with actual data from the Spanish electricity sector and show that recent decisions in this industry, particularly the failed merge between the largest firms, Endesa and Iberdrola, could have been affected had the GHHI been used by the competition agency.

Suggested Citation

  • Gilberto Vega & Javier Campos, 2002. "Concentration measurement under cross-ownership. An application to the Spanish electricity sector," Documentos de trabajo conjunto ULL-ULPGC 2002-06, Facultad de Ciencias Económicas de la ULPGC.
    • Handle: RePEc:can:series:2002-06
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    File URL: http://www.bibliotecas.ulpgc.es/fcee/hemeroteca/documentos%20de%20trabajo/DocumentosDTrabajo/doc16/dt2002-06(vers-final).pdf
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    Cited by:

    1. Patricia Charléty & Marie-Cécile Fagart & Saïd Souam, 2009. "Incentives for Partial Acquisitions and Real Market Concentration," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(3), pages 508-534, September.

    More about this item

    Keywords

    Hirschman-Herfindahl index; cross-ownership; electricity industry;
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