An increase in the index typically means that there’s been a decrease in competition and therefore greater market power to those still operating. Whereas a decrease towards zero indicates more companies fighting over the same customer base and therefore the existence of a more ‘perfect’ and competitive market.
So why is the Herfindahl Index important in the online aggregators markets? Well, over the last decade, the appearance of aggregators in different online markets has created a more level playing field for customers; by collating the rates and fees for different suppliers and presenting them to the online user in an easy-to-compare format. Therefore in those markets where price is so-often the defining decision factor, such as utilities, financial services and travel, the use of aggregators increases competition and pushes the Herfindahl Index figure closer to zero.