1. What is the HHI Index?

The Herfindahl-Hirschman Index (HHI) is a commonly accepted measure of market concentration. It is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.

2. How Does the Calculator Work?

The calculator uses the HHI formula:

Where:

• \( s_i \) — Market share of firm i (percentage)
• \( N \) — Number of firms in the market

Interpretation:

• HHI < 1,500: Unconcentrated market
• HHI 1,500-2,500: Moderately concentrated market
• HHI > 2,500: Highly concentrated market

3. Importance of HHI Calculation

Details: The HHI is used by government agencies to evaluate potential mergers and acquisitions. It provides a more complete picture of market concentration than simple concentration ratios.

4. Using the Calculator

Tips: Enter each firm's market share as a percentage (0-100). You can add more firms as needed. The calculator will sum the squares of all market shares to compute the HHI.

5. Frequently Asked Questions (FAQ)

Q1: Why is HHI important for antitrust regulation?
A: HHI helps regulators assess market concentration and potential anti-competitive effects of mergers.

Q2: What's the difference between HHI and concentration ratios?
A: HHI considers all firms in the market and gives more weight to larger firms, providing a more nuanced view than simple concentration ratios.

Q3: How should market shares be calculated?
A: Market shares should be based on revenue, units sold, or capacity within a well-defined relevant market.

Q4: What are the limitations of HHI?
A: HHI doesn't account for potential competition, market dynamics, or barriers to entry that might affect competition.

Q5: How do regulators use HHI thresholds?
A: In the U.S., mergers increasing HHI by more than 200 points in highly concentrated markets often trigger antitrust scrutiny.