π HHI Calculator
Market concentration on the 0-10,000 scale.
Herfindahl-Hirschman Index
Estimates for planning only, not financial advice.
The Herfindahl-Hirschman Index sums the squares of every firm's market share, running from near 0 (perfect competition) to 10,000 (monopoly). With shares of 30, 25, 20, 15, and 10 percent, HHI is 900 + 625 + 400 + 225 + 100 = 2,250, which US antitrust guidelines call moderately concentrated. Regulators use this exact number to screen mergers.
How to Use This Calculator
Enter each significant firm's market share as a percent. Leave unused firm slots at zero; the calculator counts only firms with positive shares.
Enter market shares for the firms that matter, biggest first.
Read the HHI and the DOJ concentration label.
For a merger, compute HHI before and after, then check the change against the guideline thresholds below. Market sizing questions pair well with our margin calculator for profitability context.
The HHI Formula
Squaring gives big firms outsized weight, which is the point: a market split 50-50 scores 5,000 while ten firms at 10% each score 1,000, even though both have the same firm count. The DOJ and FTC guidelines read the result as unconcentrated below 1,500, moderately concentrated from 1,500 to 2,500, and highly concentrated above 2,500. Mergers that raise HHI by more than 200 points in concentrated markets draw a presumption of concern; the 2023 guidelines tightened scrutiny further. Shares must be on a consistent market definition, which is where most real fights happen.
Worked Example
Five firms hold 30, 25, 20, 15, and 10 percent. Squaring: 900, 625, 400, 225, 100. Sum: 2,250, moderately concentrated. Now merge firms 1 and 2 into a 55% giant: shares become 55, 20, 15, 10, and HHI jumps to 3,025 + 400 + 225 + 100 = 3,750, an increase of 1,500 points in a now highly concentrated market. That merger would face serious antitrust challenge. Contrast a fragmented market of ten firms at 10%: HHI is 1,000, and merging two of them to 20% lifts it to 1,200, a 200-point change in an unconcentrated market that regulators would likely clear.
Where HHI Misleads
The index is only as honest as the market definition. Define the market as "US soft drinks" and concentration looks high; define it as "beverages" and it melts. Digital markets break the frame further: a platform can have modest revenue share but control the bottleneck, which HHI never sees. And HHI is a snapshot while competition keeps moving; today's 3,000-HHI market can be disrupted by a technology the shares do not anticipate.
My take: HHI is the right first screen and the wrong final answer. Use it to flag markets worth a closer look, then do the real work on entry barriers, switching costs, and buyer power. For merger math specifically, always compute the delta rather than the level alone, because the change is what the guidelines actually police.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is the Herfindahl-Hirschman Index?
The sum of squared market shares of all firms in a market, from near 0 to 10,000. Higher means more concentrated. Antitrust agencies use it as the standard first screen for market power and merger review.
What HHI is considered concentrated?
Under DOJ/FTC guidelines: below 1,500 unconcentrated, 1,500 to 2,500 moderately concentrated, above 2,500 highly concentrated. The 2023 merger guidelines kept these bands while sharpening scrutiny of deals in concentrated markets.
How does HHI affect merger approval?
Mergers raising HHI by more than 100-200 points in moderately or highly concentrated markets are presumed potentially anticompetitive and face deeper review. The parties can rebut with evidence on entry, efficiencies, or failing firms.
Should shares be decimals or percents?
Either, but the scale changes: with 0-100 shares the index runs 0 to 10,000; with 0-1 decimal shares it runs 0 to 1. This calculator uses 0-100, the DOJ convention. A 5,000 here is 0.5 in decimals.
What is a monopoly's HHI?
10,000: one firm with 100% share, squared. A 50-50 duopoly scores 5,000. Ten equal firms score 1,000. The squaring punishes dominance, which is the intended behavior.
Does HHI work for digital markets?
Imperfectly. Revenue-share HHI misses platform bottlenecks, data advantages, and zero-price markets where share by users differs from share by revenue. Regulators increasingly supplement HHI with direct evidence of competitive effects.
What is the four-firm concentration ratio?
The combined share of the top four firms, a simpler older measure. HHI improves on it by weighting every firm and penalizing dominance through squaring. Most agencies now prefer HHI.
Can HHI be gamed in merger filings?
The classic move is widening the market definition to dilute shares. Agencies counter with evidence on substitution: if customers would not switch to the added products, they do not belong in the market. Market definition is where merger cases are won.
What HHI do real industries show?
US wireless telecom sits well above 2,500 with three national carriers. Soft drinks are highly concentrated around two giants. Restaurants score near zero. The number maps intuitively once you picture the industry structure.