1. What is the HHI?

The Herfindahl-Hirschman Index (HHI) is a measure of market concentration. It's calculated by summing the squares of the market shares of all firms in the industry. The HHI ranges from close to 0 (perfect competition) to 10,000 (monopoly).

2. How Does the Calculator Work?

The calculator uses the HHI formula:

Where:

• \( market\_share_i \) — Market share of firm i (as decimal or percentage)
• \( n \) — Number of firms in the market

Explanation: The index gives more weight to larger firms, making it sensitive to the distribution of firm sizes.

3. Interpretation of HHI Values

Details:

• Below 1,500: Unconcentrated market
• 1,500-2,500: Moderately concentrated market
• Above 2,500: Highly concentrated market

(U.S. Department of Justice and Federal Trade Commission guidelines)

4. Using the Calculator

Tips: Enter market shares as percentages (e.g., 30) or decimals (e.g., 0.3), separated by commas or new lines. The calculator automatically handles both formats.

5. Frequently Asked Questions (FAQ)

Q1: Why is HHI important?
A: HHI is used by regulators to assess market competition and potential antitrust concerns.

Q2: What's the difference between HHI and CR4?
A: While CR4 only considers the top 4 firms, HHI accounts for all firms and their relative sizes.

Q3: How should I input market shares?
A: You can enter them as percentages (e.g., 25, 30, 45) or decimals (0.25, 0.30, 0.45). Both formats work.

Q4: What's considered a "high" HHI?
A: Generally, HHI above 2,500 indicates high concentration, but thresholds vary by industry and jurisdiction.

Q5: How does HHI change with mergers?
A: Mergers between significant competitors can substantially increase HHI, potentially raising antitrust concerns.