HHI Calculator - Herfindahl-Hirschman Market Index

The Herfindahl-Hirschman Index (HHI) measures market concentration by adding the squares of firm market shares expressed as percentages. Squaring gives larger firms more weight. A monopoly with 100% share has an HHI of 10,000, while four equal firms with 25% each have an HHI of 2,500. Many tiny equal competitors drive the index toward zero. To calculate HHI, square every share and sum the results. Shares of 30%, 25%, 20%, 15%, and 10% produce 900 + 625 + 400 + 225 + 100 = 2,250. The HHI results also report the reciprocal-style equivalent number of equal-sized firms: 10,000 divided by HHI. An HHI of 2,500 corresponds to four equal firms, although a real market with that HHI can have unequal shares. The classification shown uses widely cited traditional US screening bands: below 1,500 is unconcentrated, 1,500 through 2,500 is moderately concentrated, and above 2,500 is highly concentrated. Competition agencies revise guidelines and consider more than a threshold, so this label is educational rather than a current legal conclusion. A merger review also examines the increase in HHI, market definition, entry, buyer power, competitive effects, and evidence specific to the industry. Market definition is often more important than arithmetic. Product scope, geography, customer segment, capacity, imports, and the measurement period can change every share. Revenue share may differ from unit, capacity, subscriber, or transaction share. Missing firms make the entered total less than 100 and usually understate concentration. The share total is displayed so incomplete data is visible, but the index does not invent an unknown residual competitor. Use HHI to compare concentration across time, test alternative market definitions, or summarize an industry structure. Keep share sources and dates consistent. Do not compare an HHI based on national revenue with one based on local unit sales. HHI describes structure, not profitability or competitive conduct by itself; differentiated products, switching costs, network effects, regulation, and potential entry can matter even when the index is low.