HHI Calculator (Herfindahl-Hirschman Index)

HHI is the sum of squared market shares (in percent points). Square each firm’s market share and add them up. Maximum is 10,000 (one firm with 100% share). Minimum approaches 0 (infinitely many firms with infinitesimal share).

HHI = Σ(s_i)²

Where s_i is firm i’s market share as a percentage (e.g., 30 for 30%).

Why squaring matters. A market with two firms at 50% each has HHI = 2,500 + 2,500 = 5,000. A market with ten firms at 10% each has HHI = 10 × 100 = 1,000. The squaring punishes concentration heavily, which is the whole point — large firms dominate market dynamics far more than their share alone suggests.

DOJ / FTC merger guidelines (2023):

• HHI < 1,000: unconcentrated. Mergers rarely raise concerns.
• HHI 1,000-1,800: moderately concentrated. Mergers raising HHI by more than 100 points scrutinized.
• HHI > 1,800: highly concentrated. Mergers raising HHI by more than 50 points get serious review.
• HHI > 2,500: highly concentrated, presumption of harm for any meaningful merger.

The actual 2023 guideline thresholds tightened from older 2010 levels (which used 2,500 as the highly-concentrated cutoff). The current FTC has signaled aggressive enforcement at lower HHI levels too.

Typical real-world HHI values.

• US wireless carriers (Verizon, AT&T, T-Mobile): ~3,000+ (highly concentrated)
• US auto manufacturers: ~1,600 (moderately concentrated)
• US grocery (national): ~750 (unconcentrated nationally, but local markets often >2,500)
• US airlines: ~1,400 (moderately concentrated)
• US oil refining: ~750
• US software (broadly): ~250 (very fragmented across categories)

The “national vs local” trap. Antitrust authorities care about the relevant geographic market. A national HHI of 800 might mask local HHIs of 4,000+ in specific cities. The 2007 Whole Foods / Wild Oats merger was challenged on local market HHI even though national HHI was modest.

Worked example. Six firms in a market:

• Firm A: 35%
• Firm B: 25%
• Firm C: 15%
• Firm D: 10%
• Firm E: 10%
• Firm F: 5%

HHI = 35² + 25² + 15² + 10² + 10² + 5² = 1,225 + 625 + 225 + 100 + 100 + 25 = 2,300

That is a highly concentrated market under 2023 guidelines. Any merger between two of the larger firms would draw serious antitrust review.

Pre-merger and post-merger HHI. When firm A (25%) merges with firm B (15%), the combined firm has 40% share. New HHI:

• New HHI = 40² + 35² + 10² + 10² + 5² = 1,600 + 1,225 + 100 + 100 + 25 = 3,050
• Change in HHI = 3,050 - 2,300 = +750

A 750-point HHI increase in an already concentrated market = high probability of DOJ/FTC challenge.

Quick math shortcut. When two firms with shares s1 and s2 merge, ΔHHI = 2 × s1 × s2. For 25% and 15%: ΔHHI = 2 × 25 × 15 = 750. (Same answer as full recalculation.) This is how antitrust attorneys quickly screen deal HHI impact.

Limitations.

• HHI ignores entry barriers, product differentiation, switching costs, and pricing dynamics.
• A market can be technically “unconcentrated” by HHI but still have problematic dynamics (e.g., implicit collusion, captive customers).
• Defining the market is more art than science. Lawyers spend more time on market definition than HHI math.