Herfindahl-Hirschman Index (HHI) Calculator
Use this tool to measure market concentration. Enter either market shares (%) or sales/revenue values for each firm.
What Is the Herfindahl Index?
The Herfindahl-Hirschman Index (HHI), often just called the Herfindahl Index, is one of the most common ways to measure market concentration. It tells you whether a market is highly competitive, moderately concentrated, or dominated by only a few firms.
Economists, strategy analysts, regulators, and investors use HHI when they want a fast quantitative snapshot of market structure.
Core Formula
HHI = s1² + s2² + s3² + ... + sn²
Where each s is a firm’s market share percentage. Because shares are squared, larger firms have much greater impact on the result.
- If one firm controls 100% of the market, HHI = 10,000.
- If many small firms split market share equally, HHI is much lower.
- The index captures both number of firms and size imbalance.
How to Use This HHI Calculator
Option 1: Enter market shares (%)
Input each firm and its market share. If your percentages are slightly off from 100 due to rounding, keep normalization enabled and the calculator will scale them proportionally.
Option 2: Enter sales or revenue values
If you have sales amounts instead of percentages, switch to Sales/Revenue mode. The calculator will convert values to market share percentages first, then compute HHI.
- Add as many firms as needed.
- Ignore empty rows; only positive values are used.
- Use “Load Example” to test the calculator instantly.
Interpreting HHI Results
A common interpretation framework (widely used in competition analysis) is shown below:
| HHI Range | Concentration Level | Typical Reading |
|---|---|---|
| Below 1,500 | Unconcentrated | Competitive market with many meaningful players |
| 1,500 to 2,499 | Moderately concentrated | Some concentration, but not extreme dominance |
| 2,500 and above | Highly concentrated | A few firms hold substantial market power |
In merger analysis, a rising HHI can signal potential antitrust concern, especially when a deal significantly increases concentration in an already concentrated market.
Quick Example
Suppose five firms have market shares of 35%, 25%, 20%, 10%, and 10%:
HHI = 35² + 25² + 20² + 10² + 10² = 2,450
That market would be interpreted as moderately concentrated, right near the high end of the range.
Why HHI Is Better Than Simple Firm Count
A plain count of competitors misses how market power is distributed. Ten firms can still represent a concentrated market if two firms control most of the demand. HHI solves this by weighting larger shares more heavily via squaring.
- Firm count says “how many firms exist.”
- HHI says “how much power is concentrated.”
Common Mistakes to Avoid
- Mixing units: Don’t combine percentages with dollar values in one run.
- Wrong market definition: HHI depends on your chosen market boundary (product + geography).
- Forgetting smaller firms: Excluding the long tail inflates large-firm shares.
- Ignoring time effects: Compare HHI across multiple years to identify structural shifts.
Practical Use Cases
Business strategy
Use HHI to assess industry attractiveness, identify consolidation risk, and evaluate entry opportunities.
Policy and regulation
Regulators use concentration measures like HHI in merger review and competition policy screening.
Investment research
Analysts often compare HHI across sectors to estimate pricing power, margin durability, and competitive intensity.
Final Takeaway
The Herfindahl Index is simple to compute but powerful in interpretation. If you need a fast, objective concentration metric that reflects both the number of firms and their relative size, HHI is usually the best first tool. Use the calculator above to run scenarios, compare markets, and support data-driven decisions.