How do you calculate HHI from market shares?

To calculate HHI, list each firm’s market share, square each share, and sum the squared values. If you use percentages, square the percentage numbers and sum them to get an HHI between 0 and 10,000. If you use decimal shares, square the decimals and sum them to get an HHI between 0 and 1.

What are typical HHI thresholds for market concentration?

In U.S. Department of Justice and Federal Trade Commission guidelines, markets with HHI below 1,500 are considered unconcentrated, 1,500–2,500 moderately concentrated, and above 2,500 highly concentrated. Changes in HHI after a merger are also important: an increase of more than 200 points in a highly concentrated market may raise significant antitrust concerns.

Should I use percentages or decimals for HHI?

You can use either, but be consistent. Using percentages gives an HHI between 0 and 10,000, which is the most common convention in policy documents. Using decimals gives an HHI between 0 and 1. This calculator supports both formats and clearly labels the result.

How do you compute pre- and post-merger HHI?

To compute pre-merger HHI, use the original market shares of all firms. For post-merger HHI, combine the market shares of the merging firms into a single firm, then recalculate HHI. The difference between post- and pre-merger HHI (ΔHHI) is used by regulators to assess how much the merger increases market concentration.

HHI Calculator – Herfindahl–Hirschman Index of Market Concentration

Q: What is the Herfindahl–Hirschman Index (HHI)?

The Herfindahl–Hirschman Index (HHI) is a measure of market concentration used in competition and antitrust analysis. It is calculated as the sum of the squared market shares of all firms in a market. Higher HHI values indicate more concentrated markets with fewer or more dominant firms.

Compute the Herfindahl–Hirschman Index (HHI) of market concentration from firm market shares. Supports percentages or decimals, pre/post‑merger analysis, and automatic interpretation using common antitrust thresholds.

What is the Herfindahl–Hirschman Index (HHI)?

The Herfindahl–Hirschman Index (HHI) is a widely used measure of market concentration. It is calculated as the sum of the squared market shares of all firms in a market. Higher HHI values indicate that a market is dominated by a few large firms; lower values indicate a more competitive, fragmented market.

HHI formula (percentage shares):

If there are n firms with market shares \( s_1, s_2, \dots, s_n \) expressed in percent (e.g., 40, 35, 25), then:

\[ \text{HHI} = \sum_{i=1}^{n} s_i^2 \]

HHI formula (decimal shares):

If shares are expressed as decimals \( m_i \) (e.g., 0.40, 0.35, 0.25):

\[ \text{HHI}_{0-1} = \sum_{i=1}^{n} m_i^2 \] \[ \text{HHI}_{0-10000} = 10{,}000 \times \text{HHI}_{0-1} \]

Typical HHI thresholds

Competition authorities such as the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) use HHI to screen mergers:

HHI < 1,500 – Unconcentrated market
1,500 ≤ HHI < 2,500 – Moderately concentrated market
HHI ≥ 2,500 – Highly concentrated market

For mergers, both the level of HHI and the change in HHI (ΔHHI) matter. As a rough rule of thumb, an increase of more than about 200 points in a highly concentrated market may raise significant antitrust concerns.

How to use the HHI calculator

Choose input format. Select whether you will enter market shares as percentages (0–100) or decimals (0–1). The calculator automatically adjusts labels and validation.
Enter each firm’s market share. Use one row per firm. You can rename firms (e.g., “Firm A”, “Firm B”, or actual company names).
Check the sum of shares. The running total is shown above the button. For a full market, it should be close to 100% (or 1.0).
Click “Calculate HHI”. The tool shows:
- HHI on the 0–10,000 scale
- HHI on the 0–1 scale
- An interpretation of concentration level
Optional: analyze a merger. In the merger section, tick the firms that would merge and click “Calculate merger impact” to see pre‑ and post‑merger HHI and ΔHHI.

Example calculation

Suppose a market has four firms with the following shares:

Firm A: 40%
Firm B: 30%
Firm C: 20%
Firm D: 10%

HHI is:

\[ \text{HHI} = 40^2 + 30^2 + 20^2 + 10^2 = 1600 + 900 + 400 + 100 = 3{,}000 \]

An HHI of 3,000 indicates a highly concentrated market.

FAQ

Is there a maximum HHI?

Yes. The maximum HHI occurs in a pure monopoly where a single firm has 100% of the market:

On the 0–10,000 scale: \( 100^2 = 10{,}000 \)
On the 0–1 scale: \( 1.0^2 = 1.0 \)

How many firms do I need to include?

In principle, you should include all firms in the relevant market. In practice, including all major firms that account for nearly all of the market (e.g., 95–99% of total share) usually gives a very close approximation of the true HHI.

Can HHI decrease after a merger?

In standard cases, combining firms increases HHI because it reduces the number of independent competitors and increases the squared share of the merged entity. However, if the merger triggers entry or significant competitive responses that change market shares, the long‑run HHI could theoretically fall. Such dynamic effects are beyond the simple static HHI formula.

Herfindahl–Hirschman Index (HHI) Calculator

Optional: Pre‑ vs Post‑Merger HHI