HHI Calculator โ Market Concentration
Calculate the Herfindahl-Hirschman Index (HHI) to measure market concentration and competition. Enter up to 10 firms' market shares to determine whether a market is competitive, moderately concentrated, or highly concentrated.
How to use this tool
- Enter firm 1 market share, firm 2 market share, firm 3 market share, firm 4 market share, firm 5 market share, firm 6 market share, firm 7 market share, firm 8 market share, firm 9 market share and firm 10 market share in the fields above.
- Results update instantly as you type โ or click Calculate.
- Read your hhi score and the full breakdown beneath it.
โ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation โ verify with a qualified professional.
Formula
HHI = ฮฃ si2
where si is the market share of firm i expressed as a percentage (0โ100).
Interpretation: HHI < 1,500 = competitive; 1,500โ2,500 = moderate concentration; > 2,500 = high concentration.
How it works
The Herfindahl-Hirschman Index sums the squares of each firm's percentage market share, producing a value from near 0 (perfect competition) to 10,000 (pure monopoly). The U.S. Department of Justice and FTC use HHI thresholds to evaluate mergers: markets with post-merger HHI below 1,500 are unconcentrated, between 1,500 and 2,500 are moderately concentrated, and above 2,500 are highly concentrated. A merger raising HHI by more than 200 points in a highly concentrated market raises significant antitrust concerns.
Worked example
Three-firm market with shares 40%, 35%, 25%
- Firm 1: 40ยฒ = 1,600
- Firm 2: 35ยฒ = 1,225
- Firm 3: 25ยฒ = 625
- HHI = 1,600 + 1,225 + 625 = 3,450
HHI = 3,450 โ highly concentrated market (above the 2,500 threshold)
Common mistakes to avoid
- Entering market shares that do not sum to 100%: if the shares represent only the top firms and exclude a long tail of smaller competitors, the HHI will be overstated and misrepresent the true level of concentration.
- Using revenue shares instead of unit volume or quantity shares in markets where price differentiation is large, which can inflate the apparent dominance of premium-price firms relative to their unit volumes.
- Forgetting that antitrust agencies assess changes in HHI (delta-HHI) from a merger, not just the post-merger level: a deal moving HHI from 1,400 to 1,600 raises different concerns than one moving it from 2,200 to 2,400, even though both delta values are 200.
Key terms
- What does a high HHI score mean?
- A high HHI (above 2,500) indicates a highly concentrated market dominated by a few firms, suggesting less competition and potential market power concerns.
- What is a monopoly HHI?
- A pure monopoly (one firm with 100% market share) has an HHI of 10,000 (100ยฒ = 10,000).
- How do regulators use HHI?
- U.S. antitrust agencies (DOJ and FTC) use HHI to screen mergers. A post-merger HHI above 2,500 with an increase of 200+ points triggers close scrutiny.
- What is the HHI for a perfectly competitive market?
- In a market with many small firms each having a negligible share, the HHI approaches 0. Ten equal firms of 10% each yield HHI = 1,000.
Frequently asked questions
- What HHI thresholds does the US DOJ/FTC use for merger review?
- Under the 2023 Merger Guidelines, the DOJ and FTC consider markets with HHI below 1,500 unconcentrated, 1,500-2,500 moderately concentrated, and above 2,500 highly concentrated. A merger that increases HHI by more than 100 points in a highly concentrated market is presumed to harm competition.
- Can HHI be calculated on a market-share-of-1 scale instead of percentages?
- Yes. Some formulas use shares expressed as fractions (0 to 1) rather than percentages (0 to 100). When using fractions, the maximum HHI for a monopoly is 1.0 rather than 10,000. Both scales are valid as long as you are consistent; most US antitrust practice uses the 0-10,000 scale.
- Is a low HHI always evidence of healthy competition?
- Not necessarily. Markets with many small firms can still exhibit coordinated behavior (tacit collusion), regulatory barriers to entry, or network effects that prevent effective competition despite low concentration scores. HHI is one screening tool, not a complete competitive analysis.