HHI Calculator
From the market shares of competitors, compute the Herfindahl-Hirschman Index (HHI) — a measure of market concentration.
Input Data
Results
At a glance:HHI = sum of squared market shares (shares in percentage points). Squaring weights large firms more, so the more a few giants dominate, the higher the HHI — a measure of concentration used by antitrust authorities to assess mergers. Range ~0 (perfect competition) to 10,000 (monopoly). Thresholds (US DOJ/FTC): < 1,500 competitive, 1,500–2,500 moderate, > 2,500 high. This tool takes up to four firms; merge or note smaller ones. HHI flags structure, not conduct — high HHI prompts deeper review; thresholds vary by jurisdiction.
Formula
HHI = share₁² + share₂² + share₃² + share₄² (shares in points).
$$HHI = \sum_{i} s_i^{2}$$How to Use
- Enter each firm's market share (%).
- Set remaining fields to 0 if fewer than four firms.
- View the HHI and its concentration level.
HHI examples (shares in points)
| Scenario | Shares | HHI | Concentration |
|---|---|---|---|
| Competitive | 25/25/25/25 | 2,500 | Moderate |
| Oligopoly | 40/30/20/10 | 3,000 | High |
| Dominant firm | 70/20/5/5 | 5,350 | High |
| Monopoly | 100 | 10,000 | Monopoly (max) |
HHI = sum of squared shares. US thresholds: <1,500 competitive, 1,500–2,500 moderate, >2,500 high; monopoly = 10,000.
Case Studies
Case 1: Compute a market's HHI
Four firms with shares 40%, 30%, 20%, 10%.
HHI = 40² + 30² + 20² + 10² = 1,600 + 900 + 400 + 100 = 3,000.
3,000 (> 2,500 per DOJ/FTC) is 'highly concentrated'. The squaring trick weights big firms more — 40² = 1,600 vs 10² = 100 — so HHI reveals dominance, not just firm count.
Case 2: HHI in merger review
Same market (HHI 3,000). If the 20% and 10% firms merge, the combined share is 30%; market becomes 40/30/30.
Post-merger HHI = 40² + 30² + 30² = 1,600 + 900 + 900 = 3,400. HHI rose from 3,000 to 3,400, ΔHHI = 400.
Authorities watch both the level and the ΔHHI. With a highly concentrated post-merger market (> 2,500) and ΔHHI > 200, it is usually presumed to 'likely lessen competition' and faces deeper review or blocking — HHI's key use: a quantifiable gate for whether a merger over-concentrates and harms consumers (possibly via price rises and deadweight loss).
FAQ
What HHI means highly concentrated?
HHI ranges from near 0 to 10,000. Common references: < 1,500 is 'competitive' (many firms, none dominant); 1,500–2,500 'moderately concentrated'; > 2,500 'highly concentrated' (few giants dominate). The example 40/30/20/10 → 3,000 is highly concentrated. Mergers are also judged by how much HHI rises, not just the level.
Why square the shares?
Squaring 'amplifies the weight of big firms', revealing dominance. Contrast: market A has one firm at 100% → HHI = 100² = 10,000; market B has 100 firms at 1% each → HHI = 100 × 1² = 100. Both sum to 100% share, but concentration is worlds apart, and squaring makes it obvious (10,000 vs 100). Simply summing shares always equals 100, unable to tell concentrated from dispersed. Squaring is what makes HHI a valid concentration measure.
Does high HHI mean anticompetitive behaviour?
Not necessarily. HHI is a structural measure of share concentration, not proof of abuse or anticompetitive conduct. Some industries are naturally concentrated (scale economies, tech barriers, network effects) yet still competitive with fair prices and innovation. Conversely, even a moderate HHI with collusion is illegal. Authorities use HHI as a screening signal — high HHI prompts review of behaviour, entry barriers and consumer harm, not a verdict from one number.
HHI vs concentration ratio (CRn)?
Both measure concentration but differ in method and sensitivity; HHI is usually seen as more complete. CRn simply sums the top n firms' shares (often CR4, CR8). Its merits are simplicity, but two flaws: it looks only at the top n, ignoring the rest and the distribution among them; and summing directly cannot tell 'even shares' from 'one dominant' — (25,25,25,25) and (85,5,5,5) both have CR4 = 100% yet very different competition. HHI's squares fix this: (25,25,25,25) → 2,500, (85,5,5,5) → 7,300, clearly showing the latter is far more concentrated. HHI also theoretically includes all firms (small ones contribute little after squaring). So HHI is more sensitive to uneven shares and better reveals a dominant firm — why agencies (US DOJ/FTC) prefer HHI for merger review; CRn remains for quick industry description.
HHI range and reading thresholds?
The range depends on share units; this tool (like US practice) uses percentage points (40% = 40), so HHI runs ~0 to 10,000. The 10,000 ceiling = pure monopoly (one firm, 100% → 100²); the floor → 0 with countless tiny firms (near perfect competition). Reading (US DOJ/FTC 2010 Horizontal Merger Guidelines): < 1,500 competitive; 1,500–2,500 moderate; > 2,500 high. In mergers, also watch the HHI increment (ΔHHI): in a highly concentrated market (> 2,500), a merger raising HHI by > 200 is presumed to harm competition and faces strict review; 100–200 may draw concern. Two cautions: these are US references — the EU and others differ; and HHI is only a quantitative screen — real antitrust also weighs entry barriers, product differentiation, buyer power and efficiency, never a single number.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.