Herfindahl-Hirschman Index (HHI)
Calculate the Herfindahl-Hirschman Index (HHI) to measure market concentration and competitive dynamics. Enter firm market shares for instant antitrust analysis with charts and breakdowns.
About This Calculator
The Herfindahl-Hirschman Index (HHI) Calculator helps businesses, economists, analysts, and legal professionals measure market concentration by entering the market shares of competing firms. Named after economists Orris C. Herfindahl and Albert O. Hirschman, HHI is the standard metric used by antitrust authorities worldwide — including the US Department of Justice (DOJ), Federal Trade Commission (FTC), European Commission (EC), Competition Commission of India (CCI), and UK Competition and Markets Authority (CMA) — to evaluate mergers, acquisitions, and competitive dynamics.
The HHI is calculated by squaring the market share of each firm in the industry and summing the resulting numbers. Market shares are entered as percentages, and the calculator automatically normalizes them to total 100%. The resulting HHI Score ranges from near 0 (highly competitive market with many small firms) to 10,000 (pure monopoly). A higher HHI indicates greater market concentration and reduced competition. The calculator also displays the HHI in decimal form, concentration level classification, and the equivalent number of equal-sized firms that would produce the same index value.
Regional Notes
United States: The DOJ/FTC 2010 Horizontal Merger Guidelines classify HHI below 1,500 as unconcentrated, 1,500–2,500 as moderately concentrated, and above 2,500 as highly concentrated. Mergers producing an HHI increase exceeding 200 points in highly concentrated markets are presumed to enhance market power. An increase of 100 points or less in unconcentrated markets is unlikely to face challenge.
European Union: The European Commission considers HHI below 1,000 as unconcentrated, 1,000–2,000 as moderate, and above 2,000 as high concentration. Concerns arise when ΔHHI exceeds 150 in moderately concentrated markets or 250 in highly concentrated markets.
India: The Competition Commission of India (CCI) follows similar market concentration analysis under the Competition Act, 2002, using HHI alongside other factors in merger review. India does not prescribe fixed numerical thresholds but evaluates market structure on a case-by-case basis.
Frequently Asked Questions
What is the Herfindahl-Hirschman Index (HHI)?
The Herfindahl-Hirschman Index (HHI) is an economic measure of market concentration calculated by summing the squares of each firm's market share. It ranges from near 0 (highly competitive) to 10,000 (pure monopoly). Regulators use HHI to evaluate mergers and antitrust concerns.
How is HHI calculated?
HHI is calculated by squaring the market share of each firm in the industry (as a percentage) and summing the results. For example, if 4 firms have shares of 30%, 30%, 20%, and 20%, HHI = 30² + 30² + 20² + 20² = 900 + 900 + 400 + 400 = 2,600 points.
What are HHI thresholds used by US regulators?
The US Department of Justice classifies HHI below 1,500 as unconcentrated, 1,500 to 2,500 as moderately concentrated, and above 2,500 as highly concentrated. Mergers increasing HHI by over 200 points in highly concentrated markets are presumed to enhance market power under the 2010 Horizontal Merger Guidelines.
What HHI thresholds does the EU use?
The European Commission considers HHI below 1,000 as unconcentrated, 1,000 to 2,000 as moderate concentration, and above 2,000 as high concentration. Concerns are raised when HHI increases by more than 150 points in moderately concentrated markets or 250 points in highly concentrated markets.
What does a high HHI indicate?
A high HHI (above 2,500) indicates a highly concentrated market with limited competition. This may signal that a few dominant firms have significant market power, potentially leading to higher prices, reduced output, and less innovation. Regulatory authorities closely scrutinize mergers in highly concentrated markets.
What is the difference between HHI and concentration ratio?
While the concentration ratio (CR4) shows the combined market share of the top 4 firms, HHI gives more weight to larger firms by squaring market shares. HHI captures both the number of firms and inequality in their sizes, making it more sensitive to changes in market structure than simple concentration ratios.
What is the equivalent number of firms in HHI?
The equivalent number of firms (N_eff = 1 / HHI_decimal) represents how many equal-sized firms would produce the same HHI value. For example, an HHI of 2,500 (0.25 decimal) is equivalent to 4 equal-sized firms. This helps intuitively understand concentration levels regardless of actual firm count.
Is HHI used in India and the UK?
Yes, HHI is used globally. India's Competition Commission (CCI) and the UK's Competition and Markets Authority (CMA) both use HHI as a screening tool for merger reviews. While exact thresholds vary, the underlying methodology and interpretation of market concentration remain consistent across jurisdictions.