The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.
What does the Herfindahl index indicate?
- The Herfindahl–Hirschman Index (HHI) is a common measure of market concentration of an industry - the size of firms in relation to the industry they are in- and is used to determine market competitiveness.
- Each company has an equal share of 2%. HHI before proposed merger
- The HHI is used to determine market competitiveness. Markets with an HHI of less than 1,500 are considered competitive markets, moderately concentrated for HHIs between 1,500 and 2,500, and highly concentrated for HHIs of 2,500 and above.
- HHI Calculator is a tool to easily calculate the value of the HHI. The HHI Index measures market concentration (not market capitalization) in a particular industry and is used to determine market competitiveness.
- A 60% four-company concentration rate means that the top four companies in the industry account for 60% of sales.
- A 90% four-company concentration rate means that the top four companies account for 90% of sales. Concentration ratios are useful for identifying oligopolies, but they have four drawbacks.
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