Estimating the Size Distribution of Firms Using Government Summary Statistics.

Using a maximum entropy technique, the authors estimate the market shares of each firm in an industry using the available government summary statistics such as the four-firm concentration ratio and the Herfindahl-Hirschmann Index. They show that their technique is very effective in estimating the distribution of market shares in twenty industries. The authors' results provide support for the recent practice of using the Herfindahl-Hirschmann Index rather than four-firm concentration ratio as the key explanatory variable in many market power studies, if only one measure is to be used. Copyright 1996 by Blackwell Publishing Ltd.