How to use and interpret the HHI calculator
What the calculator estimates
The Herfindahl–Hirschman Index measures how unevenly a market is distributed across competing firms. It is calculated by squaring every firm’s percentage market share and adding the results. A market with one firm at 100% produces the maximum HHI of 10,000. A market split evenly among many small firms produces a much lower score. Because shares are squared, a large firm contributes disproportionately more than a small firm.
HHI = s₁² + s₂² + … + sₙ²
The default example uses shares of 35%, 22%, 20%, 10%, 8%, 3%, and 2%. These total 100% and produce an HHI of 2,286. The same index may also be written as 0.2286 when market shares are entered as decimal fractions rather than percentage points.
Entering market shares correctly
Firm name is optional and only improves labels in the chart, table, merger screen, and spreadsheet export. Use a recognizable company, brand, platform, or supplier name. Duplicate names are permitted, although unique labels make the output easier to audit.
Market share is the firm’s share of the defined market, entered as a percentage from 0% to 100%. The field accepts values such as 25, 25%, or 25.5 %. A blank value is treated as zero and omitted from active-firm calculations. Negative shares and shares above 100% are rejected.
For the cleanest interpretation, all entered shares should sum to 100%. A total below 100% usually means smaller firms or an “other” category are missing. A total above 100% often signals double counting, overlapping segments, or inconsistent data periods. The calculator will still show an HHI so you can troubleshoot, but it flags the incomplete allocation.
Understanding each result
HHI is the primary concentration score. The classic scale used here labels values below 100 as highly competitive, 100 to below 1,500 as unconcentrated, 1,500 through 2,500 as moderately concentrated, and above 2,500 as highly concentrated. These labels are descriptive screening categories, not findings about market power.
Effective firms equals 10,000 divided by the HHI. It translates an unequal market into the equivalent number of equally sized firms. An HHI of 2,500 corresponds to four effective equal-sized firms. A lower effective-firm count means concentration is greater.
Largest share identifies the leading entered firm. Top-four share, often called CR4, adds the four largest shares without squaring them. CR4 is intuitive, while HHI is more sensitive to whether the largest firms are evenly matched or dominated by one leader. Decimal HHI is the same result divided by 10,000.
Reading the chart and contribution table
The donut chart shows the distribution of the entered market shares. When more than five firms are active, the four largest firms remain separate and the smaller firms are combined into “Other” so the visual remains legible. The legend reports each displayed segment’s share and its percentage of the entered total. If entered shares total less or more than 100%, the donut normalizes only the visual proportions; it does not alter the HHI calculation.
The table ranks active firms from largest to smallest. “HHI contribution” is the squared share used in the formula. “Share of HHI” shows how much of the final index comes from that firm. This makes the weighting effect visible: in the default example, the 35% firm supplies more than half of the total HHI.
How the merger screen works
Select two different firms to model a simple combination in which their shares are added and every other share remains unchanged. The post-merger HHI equals the current HHI plus twice the product of the two merging shares. In the default example, combining 22% and 20% raises HHI by 880 points, from 2,286 to 3,166.
The screening note references the U.S. Department of Justice HHI explanation and the 2023 Merger Guidelines. Those guidelines describe a market HHI above 1,800 as highly concentrated and an increase above 100 points as significant for the structural presumption described there. A separate indicator also considers a merged share above 30% with an HHI increase above 100.
Important limitations and common mistakes
HHI quality depends on the market definition and the share data. Combining unrelated products, mixing national and local shares, using different time periods, or measuring some firms by revenue and others by units can produce a precise-looking but unreliable score. The Federal Trade Commission’s merger guidance explains that competitive analysis considers evidence beyond concentration metrics.
Use consistent data sources and document whether the share denominator is revenue, volume, capacity, users, transactions, or another measure. Consider testing alternative market definitions rather than relying on one boundary. Reset clears the example values to a neutral three-row state. Download Excel creates a workbook from the current entries, calculations, breakdown, and merger selection so the analysis can be reviewed outside the page.