HHI Calculator
Calculate the Herfindahl-Hirschman Index (HHI) to measure market concentration and competition levels. HHI is used by antitrust authorities to assess market competitiveness and evaluate potential merger impacts.
Market Share Data
HHI Results
Herfindahl-Hirschman Index:
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Market Concentration:
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Competition Level:
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Market Analysis
Number of Firms:
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Largest Firm Share:
Market Structure:
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Antitrust Assessment
Mergers Likely to be:
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Regulatory Scrutiny:
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Risk Assessment:
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Understanding Herfindahl-Hirschman Index (HHI)
The Herfindahl-Hirschman Index (HHI) is a commonly used measure of market concentration in economics and antitrust analysis. It provides a quantitative assessment of the competitiveness of a market by examining the distribution of market shares among firms operating within it.
What is HHI?
Definition
- Herfindahl-Hirschman Index measures market concentration
- Sum of squared market shares of all firms
- Ranges from 0 (perfect competition) to 10,000 (monopoly)
- Used by antitrust authorities worldwide
Calculation
- HHI = S (Market Share of Firm i)²
- Market shares expressed as percentages
- Squared to emphasize larger firms
- All firms in the market included
HHI Interpretation
HHI Ranges & Competition Levels
Understanding market concentration levels
HHI < 1,500:
- Unconcentrated market
- Highly competitive
- Many small firms
- Mergers generally allowed
HHI 1,500 - 2,500:
- Moderately concentrated
- Some competition concerns
- Mixed market structure
- Mergers may be challenged
HHI > 2,500:
- Highly concentrated
- Significant competition concerns
- Few large firms dominate
- Mergers likely to be blocked
HHI in Antitrust Analysis
| HHI Range | Market Structure | Mergers | Regulatory Action |
|---|---|---|---|
| 0 - 1,499 | Unconcentrated | Generally permitted | No action required |
| 1,500 - 2,499 | Moderately concentrated | May be challenged | Further investigation |
| 2,500 - 10,000 | Highly concentrated | Likely challenged | Close scrutiny |
HHI Calculation Examples
Perfect Competition:
- 100 firms, 1% each
- HHI = 100 × (1)² = 100
- Highly competitive market
- Very low concentration
Duopoly:
- 2 firms, 50% each
- HHI = (50)² + (50)² = 5,000
- Highly concentrated
- Significant market power
Monopoly:
- 1 firm, 100%
- HHI = (100)² = 10,000
- Maximum concentration
- Complete market control
HHI vs Other Concentration Measures
HHI vs Concentration Ratio:
- CR4 considers top 4 firms only
- HHI considers all firms
- HHI gives more weight to large firms
- HHI is more comprehensive
HHI vs Gini Coefficient:
- Gini measures income inequality
- HHI measures market share inequality
- Different calculation methods
- Similar concentration concepts
HHI in Merger Analysis
Pre-merger HHI:
- Current market concentration
- Baseline for analysis
- Existing competitive conditions
- Starting point for evaluation
Post-merger HHI:
- Projected concentration after merger
- Combined market shares
- Change in HHI (?HHI)
- Antitrust review trigger
HHI Limitations
Market Definition Issues:
- Geographic market boundaries
- Product market definition
- Substitutes and complements
- Dynamic market changes
Data Limitations:
- Market share accuracy
- Private company data
- International operations
- Time-sensitive information
HHI Applications
Antitrust Enforcement:
- FTC and DOJ merger reviews
- European Commission analysis
- Competition authority decisions
- Legal precedent establishment
Business Strategy:
- Market entry decisions
- Competitive positioning
- Pricing strategy analysis
- Investment planning
Key Takeaways for HHI
- HHI measures market concentration by summing the squares of all firms' market shares
- HHI ranges from 0 (perfect competition) to 10,000 (pure monopoly)
- Markets with HHI below 1,500 are considered unconcentrated and competitive
- HHI between 1,500 and 2,500 indicates moderate concentration with potential competition concerns
- Markets with HHI above 2,500 are highly concentrated and may face antitrust scrutiny
- HHI is widely used by antitrust authorities to evaluate mergers and market competition
- The index gives greater weight to larger firms, making it sensitive to market share distribution
- HHI analysis requires careful market definition and accurate market share data