Herfindahl-Hirschman Index (HHI) Calculator

You can use this quick and simple calculator to determine the value of the Herfindahl-Hirschman Index for a provided list of companies in accordance with their market shares.

What is the Herfindahl-Hirschman Index (HHI)?

The Herfindahl–Hirschman Index (HHI), is an approach that is commonly used to measure market concentration. It is calculated by squaring the market share of each organization that is competing within a given market and then adding the resulting numbers together. For instance, if a market consists of four firms that have shares of 25, 25, 40, and 10 percent, the HHI would be as follows:

252 + 252 + 402 + 102 = 625 + 625 + 1600 + 100 = 2,950

The HHI ranges from 0 (least concentrated) to 10,000 (most concentrated).

In a hypothetical situation in which the HHI reaches 10,000, there is just one company operating in the market, and it possesses 100% of the market share. Per guidance issued by the U.S. Department of Justice, the correlation between HHI and market concentration is as follows:

  • HHI < 1,500 = an industry that has a low market concentration.
  • HHI between 1,500 and 2,500 = an industry that has a moderate concentration.
  • HHI > 2,500 represents a highly concentrated industry.
    • One of the most significant benefits of the HHI is that it involves a simple calculation and a small amount of data. However, due to its simplicity, it does not take into consideration the intricacies of different markets in a manner that facilitates a genuinely precise evaluation of the monopolistic or competitive market environment.

HHI Calculator

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HHI Formula

The formula that is used to calculate the HHI is as follows:

HHI = MS12 + MS22 + MS32 + ... + MSn2

Where MSn is the market share percentage of firm n denoted as a whole number.

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