HHI Calculator (Herfindahl-Hirschman Index)
Enter each firm's market share as a percentage. Example: 40, 30, 20, 10. This tool calculates HHI, concentration category, and an optional merger impact estimate.
What is the HHI?
The Herfindahl-Hirschman Index (HHI) is a common market concentration index used in economics, finance, strategy, and antitrust analysis. It helps answer a practical question: How concentrated is a market?
Instead of just counting the number of firms, HHI captures both the number of firms and how market share is distributed among them. A market with many equal competitors can look very different from a market where one dominant company controls most sales.
HHI formula
The formula is straightforward:
HHI = s12 + s22 + ... + sn2
where each s is the market share percentage of a firm (e.g., 35, not 0.35).
- If one firm has 100% share, HHI = 10,000 (maximum concentration).
- If 10 firms each have 10%, HHI = 1,000.
- If shares are evenly split among many firms, HHI decreases.
How to use this HHI calculator
Step 1: Enter market shares
Add a row for each competitor and input market share percentages. You can include as many firms as needed.
Step 2: Choose normalization behavior
If your shares do not add exactly to 100%, auto-normalization rescales them proportionally. This is useful when data is rounded or incomplete.
Step 3: Calculate and interpret
Click Calculate HHI to see:
- HHI on the 0–10,000 scale
- Normalized HHI (0–1)
- Total input share
- Equivalent number of equal-size firms
- Concentration category and merger delta estimate
Interpreting HHI values
Common interpretation bands used in market concentration screening are:
- Below 1,500: Unconcentrated market
- 1,500 to 2,499: Moderately concentrated market
- 2,500 and above: Highly concentrated market
These ranges are widely cited in competition economics and merger screening, though regulatory frameworks can evolve. Always pair HHI with industry context, entry barriers, and customer switching costs.
Worked example
Suppose four firms have shares of 40%, 30%, 20%, and 10%:
- 402 = 1600
- 302 = 900
- 202 = 400
- 102 = 100
Total HHI = 3000, indicating a highly concentrated market.
Why HHI is useful
- Antitrust and merger analysis: Quickly screens potential competition concerns.
- Strategic planning: Helps firms evaluate competitive intensity.
- Investor research: Supports sector-level risk and pricing power analysis.
- Policy and regulation: A standardized way to compare markets over time.
Limitations to keep in mind
HHI does not capture everything
HHI is powerful but incomplete. It does not directly include product differentiation, innovation cycles, geographic segmentation, platform effects, or vertical integration.
Data quality matters
If market share inputs are estimated poorly, HHI output can be misleading. Use reliable market sizing and clearly defined market boundaries.
Context still wins
In real-world competition analysis, HHI is one metric among many. Analysts often pair it with concentration ratios (CR4/CR8), pricing trends, and entry/exit dynamics.
FAQ
What is a “good” HHI?
There is no universally “good” value; lower HHI generally means more competition, while higher HHI suggests stronger concentration and potential market power.
Can I use decimals?
Yes. You can enter values like 12.5 or 3.75. The calculator handles decimal shares.
What if my shares do not sum to 100?
Turn on normalization (enabled by default) to scale your entries. If you leave normalization off, the tool still computes HHI but warns you that interpretation may be less reliable.