Herfindahl-Hirschman Index (HHI) Calculator
This calculator is designed for corporate finance professionals to assess market concentration and competition level using the Herfindahl-Hirschman Index (HHI). By entering market shares of companies, you can determine the level of competitiveness in a market.
Calculator
Results
Data Source and Methodology
All calculations are rigorously based on the standard HHI formula as recognized in economic analysis and competition law.
The Formula Explained
HHI = \(\sum_{i=1}^{N} s_i^2\)
Glossary of Variables
- Market Share (%): The percentage share of the market held by a specific firm.
- HHI: The sum of the squares of the market shares of all the firms in the market.
How It Works: A Step-by-Step Example
Consider a market with three firms having market shares of 40%, 35%, and 25%. The HHI is calculated as \(40^2 + 35^2 + 25^2 = 1600 + 1225 + 625 = 3450\).
Frequently Asked Questions (FAQ)
What is the Herfindahl-Hirschman Index (HHI)?
The HHI is a measure of market concentration to determine the competitiveness of a market.
How is HHI used?
HHI is used by regulatory agencies to assess the impact of mergers and acquisitions on market competition.
What are the thresholds for HHI?
HHI below 1500 indicates a competitive marketplace, 1500-2500 indicates moderate concentration, and above 2500 indicates high concentration.