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 Formula

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

HHI = MS₁² + MS₂² + MS₃² + ... + MS_n²

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