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What is a shortcoming of the HHI measure?

What is a shortcoming of the HHI measure?

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The problem with the HHI index is that it treats all the firms similarly. For example, it does not take into account the credit quality of the borrowers. Both firms whether healthy and not are considered equal on the basis of the size which may not give a true picture. The HHI index may give misleading results as the high concentration ratio does not imply that there is no competition or the firms making high concentration are better than the rest. High concentration domestically does not always imply competitive or burgeoning global competitive.

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