What is the Herfindahl-Hirschman Index for this industry?
Rachel Hickman
Published Feb 11, 2026
What is the Herfindahl-Hirschman Index for this industry?
The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 + 202 = 2,600).
Which industry has the highest Herfindahl Index?
monopoly
The largest HHI possible is the case of monopoly, where one firm has 100% of the market; the index is 1002, or 10,000. An industry with two firms, each with 50% of total output, has an HHI of 5,000 (502 + 502). In an industry with 10,000 firms that have 0.01% of the market each, the HHI is 1.
What is a good Herfindahl Index?
A market with an HHI of less than 1,500 is considered a competitive marketplace, an HHI of 1,500 to 2,500 is moderately concentrated, and an HHI of 2,500 or greater is highly concentrated.
How do I calculate the Herfindahl Index?
You can calculate Herfindahl Index by squaring the market share for each firm (up to 50 firms) and then adding the squares. In a perfectly competitive market, HHI should approach zero.
What is a highly concentrated market?
Definition: Market concentration is used when smaller firms account for large percentage of the total market. If the top firms keep on gaining market share, then we say that the industry has become highly concentrated.
What does a low Herfindahl-Hirschman Index mean?
The Herfindahl-Hirschman Index is an index that measures the market concentration of an industry. A low degree of concentration means that the industry is closer to a perfect competition scenario, where many firms of more or less equal size share the market.
What does HHI stand for?
HHI
| Acronym | Definition |
|---|---|
| HHI | Hilton Head Island |
| HHI | Hardware and Home Improvement (various organizations) |
| HHI | Herfindahl-Hirschman Index (measure of market concentration) |
| HHI | Household Income |
Can HHI be a decimal?
This means that after the merge of company B and company C, the market is highly concentrated. Please note that, in some conventions, the value of the HHI index is expressed as a decimal – our examples would be 0.2286 and 0.3166 respectively.
What is the Herfindahl-Hirschman Index used for?
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.
