1. What is the Herfindahl Hirschman Index?

The Herfindahl Hirschman Index (HHI) is a measure of market concentration. It is calculated by summing the squares of the market shares of all firms in the industry. The HHI ranges from 0 to 10,000, with higher values indicating greater market concentration.

2. How Does the Calculator Work?

The calculator uses the HHI formula:

Where:

• \( S_i \) — Market share of firm i (percentage)
• \( \sum \) — Summation over all firms in the market

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

3. Importance of HHI Calculation

Details: HHI is widely used by competition regulators to assess market competitiveness. It helps identify monopolistic trends and is crucial for merger and acquisition analysis.

4. Using the Calculator

Tips: Enter market shares as comma-separated percentages (e.g., "30, 20, 15, 10, 25"). All values must be valid percentages (≥0).

5. Frequently Asked Questions (FAQ)

Q1: What does the HHI value indicate?
A: HHI below 1,500 indicates competitive marketplace, 1,500-2,500 moderate concentration, and above 2,500 high concentration.

Q2: How is HHI different from concentration ratios?
A: Unlike concentration ratios that only consider top firms, HHI accounts for all firms in the market and gives more weight to larger firms.

Q3: What are the limitations of HHI?
A: HHI doesn't account for potential market entrants, geographic markets, or product differentiation between firms.

Q4: How is HHI used in antitrust regulation?
A: Regulatory agencies use HHI to evaluate mergers - significant increases in HHI may trigger antitrust concerns.

Q5: Should market shares be in decimals or percentages?
A: Market shares should be entered as percentages (e.g., 25 for 25%), not decimals (0.25).