HHI Calculator (Herfindahl-Hirschman Index)
Enter each firm's percentage market share to compute the Herfindahl-Hirschman Index (HHI). The calculator shows the DOJ/FTC concentration category, normalized HHI, how much each firm contributes to market concentration, and how a proposed merger would change the index. Results update instantly as you type.
What is the Herfindahl-Hirschman Index?
The Herfindahl-Hirschman Index (HHI) is the standard measure of market concentration used by economists, antitrust regulators, and competition lawyers worldwide. It is calculated by squaring each firm's percentage market share and summing the results across all firms in the market. The index ranges from near 0 (a perfectly competitive market with many tiny firms) to 10,000 (a monopoly where one firm holds 100% of the market). A market with 10 equal-sized firms each holding 10% would have an HHI of 10 x 100 = 1,000, placing it firmly in the unconcentrated range. A duopoly splitting the market 60/40 would score 60^2 + 40^2 = 3,600 + 1,600 = 5,200, a highly concentrated result.
How the DOJ and FTC use HHI
The U.S. Department of Justice and the Federal Trade Commission use HHI as a primary screen when evaluating proposed mergers and acquisitions under the Hart-Scott-Rodino Act. Under the 2023 Merger Guidelines, a post-merger HHI below 1,500 is considered unconcentrated and is unlikely to raise antitrust concerns. Markets with HHI between 1,500 and 2,500 are moderately concentrated: mergers that increase the index by more than 100 points in this range warrant additional scrutiny. Markets above 2,500 are highly concentrated: a merger raising the HHI by more than 100 points in such a market is presumed to harm competition and may be challenged. The European Commission uses similar, though not identical, thresholds in its merger control regime. The delta (change in HHI caused by a merger) can be approximated as 2 x share_A x share_B, which is why this calculator computes it directly.
Normalized HHI and what it adds
Raw HHI depends partly on how many firms exist in a market: a market with only two firms can achieve a minimum HHI of 5,000 (50/50 split), while a market with 10 firms can achieve a minimum of 1,000. This makes cross-market comparisons tricky. Normalized HHI corrects for this by rescaling the raw HHI to a 0-1 range, where 0 represents a perfectly equal split among all active firms and 1 represents a monopoly. The formula is (HHI - HHI_min) / (10,000 - HHI_min), where HHI_min = 10,000 / n. A normalized HHI above 0.5 in a market with many firms signals dominance by one or a few players that is far more severe than the raw number alone suggests.
Practical notes on market share data
Accurate HHI calculation requires defining the relevant market carefully. Courts and regulators distinguish between product market (what goods compete with each other) and geographic market (the area in which competition occurs). A broad market definition (e.g. "all beverages") will produce a lower HHI than a narrow one (e.g. "premium energy drinks sold in the United States"). Market shares are typically based on annual revenue, unit sales, or production capacity, depending on the industry. When shares for all firms are not available, an "other" category can be assigned the residual share to make the total reach 100%. This calculator flags when entered shares total less than 95% so you can catch missing data.
DOJ/FTC HHI concentration thresholds (2023 Merger Guidelines)
| HHI range | Market structure | Merger review stance | Regulatory tone |
|---|---|---|---|
| Below 1,500 | Unconcentrated | Unlikely to be challenged | Permissive |
| 1,500 - 2,500 | Moderately concentrated | Mergers raising HHI by 100+ warrant scrutiny | Caution |
| Above 2,500 | Highly concentrated | Mergers raising HHI by 100+ presumed anti-competitive | Restrictive |
| 10,000 | Monopoly (theoretical max) | No competing firms | Blocked |
U.S. Department of Justice and Federal Trade Commission use these thresholds when reviewing mergers. A merger that increases HHI by more than 100 points in a concentrated market typically warrants closer scrutiny.
Frequently asked questions
What is a good HHI score?
A lower HHI indicates a more competitive market, which is generally considered preferable from an antitrust standpoint. Under DOJ/FTC guidelines, an HHI below 1,500 indicates an unconcentrated market, 1,500 to 2,500 is moderately concentrated, and above 2,500 is highly concentrated. A score of 10,000 represents a perfect monopoly. There is no single "good" score because the answer depends on the industry: utilities and other natural monopolies may legitimately operate with high HHI values.
How is the HHI different from the four-firm concentration ratio (CR4)?
The CR4 simply adds the market shares of the four largest firms. The HHI squares each share before summing, so it gives disproportionately more weight to large shares. A market with one firm at 80% and four firms at 5% each has a CR4 of 100% but an HHI of 6,500, reflecting the dominant position of the top firm in a way the CR4 does not. Regulators prefer HHI because it captures the full firm distribution, not just the top four.
Why does my HHI not reach 10,000 even when I enter 100% total share?
HHI reaches 10,000 only when a single firm holds 100% of the market (100^2 = 10,000). When shares are distributed across multiple firms, the squaring operation means the HHI is always less than 10,000. For example, two firms each at 50% produce an HHI of 5,000, and 10 firms each at 10% produce an HHI of 1,000.
What is the merger delta and when does it trigger regulatory concern?
The merger delta is the increase in HHI caused by combining two firms. It can be calculated exactly by recomputing HHI after the merger, or approximated as 2 x share_A x share_B. Under DOJ/FTC guidelines, a merger that raises HHI by more than 100 points in a market already above 2,500 is presumed to be anti-competitive. Between 1,500 and 2,500, a delta above 100 warrants scrutiny. Below 1,500, most mergers face little resistance on concentration grounds alone.
Does HHI apply outside the United States?
Yes. The European Commission uses HHI in its Horizontal Merger Guidelines, with broadly similar thresholds: below 1,000 is unlikely to raise concerns, 1,000-2,000 is a zone of possible concern when the delta exceeds 250, and above 2,000 is likely to raise concerns when the delta exceeds 150. Many other jurisdictions, including Canada, Australia, and the UK, also use HHI as a primary concentration metric, though the exact thresholds may differ.
Can I use HHI for non-commercial markets?
Yes. HHI is used in banking (the Federal Reserve uses it to assess geographic market concentration), media (to measure viewership or readership concentration), academic publishing, and even biodiversity research (where it measures species dominance within an ecosystem). Any situation where entities hold "shares" of a resource or audience can be analyzed with HHI.