What this calculator does
The Herfindahl-Hirschman Index squares each firm's market share and adds them up. Squaring is the point: it weights large firms far more heavily than small ones, so one dominant player produces a much higher score than several equal ones.
The difference is stark. Five firms with 20 per cent each give an HHI of 2,000, while one firm with 70 per cent and three small rivals gives 5,250, even though both markets have similar numbers of participants.
The formula
Each market share, expressed as a percentage, is squared and the results are summed. The maximum is 10,000, which occurs when a single firm holds the entire market.
| Term | Meaning |
|---|---|
| HHI | The sum of squared market shares, running from near zero to 10,000. |
| Unconcentrated | Below 1,500, generally regarded as competitive. |
| Highly concentrated | Above 2,500, which attracts regulatory attention in merger review. |
The inputs explained
| Field | What to enter |
|---|---|
| Market shares, comma-separated (%) | Market share of each firm as a percentage, comma separated. They should total roughly 100. |
When to use it
Assessing a proposed merger
Competition authorities use HHI levels and the change in HHI as screening thresholds.
Describing an industry structure
One number conveys concentration more precisely than a description does.
Tracking consolidation over time
A rising index shows a market concentrating even when the firm count stays similar.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How does the shape of a market change the index?
The same total market split three different ways.
| Market shares | HHI | Interpretation |
|---|---|---|
| 5 firms, largest 20% | 2,000.0 | Moderately concentrated market |
| 4 firms, largest 40% | 2,850.0 | Highly concentrated market |
| 4 firms, largest 70% | 5,250.0 | Highly concentrated market |
Questions
Why square the shares?
To weight large firms disproportionately. A firm with 50 per cent contributes 2,500 while ten firms with 5 per cent each contribute 250 in total, which correctly reflects that one dominant player concentrates a market far more than many small ones.
What are the regulatory thresholds?
United States merger guidelines have historically treated below 1,500 as unconcentrated, 1,500 to 2,500 as moderately concentrated and above 2,500 as highly concentrated, with the change in HHI from a merger mattering as much as the level.
What is the maximum value?
10,000, which is a single firm holding 100 per cent of the market. The minimum approaches zero as the number of equally sized firms grows without limit.
How is the market defined?
That is usually the hardest and most contested question. Whether a market is national or regional, and which products count as substitutes, changes the shares entirely and can determine whether a merger is approved.
For customer concentration in a business, see the customer churn and retention calculator. For margins in a competitive market, see the operating margin calculator.