Herfindahl-Hirschman Index

The Herfindahl-Hirschman Index (HHI) calculator computes the HHI market concentration index for a list of companies based on their market share.

INSTRUCTIONS:  Enter the following:

• (MS)  Enter the Market Share for all of the companies separated by commas (e.g.  36,27,15,13,9)

Herfindahl-Hirschman Index (HHI):  The calculator returns the index, index classification, lowest and highest market shares, the range between them, and the sum of the market shares entered. 

Statistics Calculators

• Observational Stats:  This function accepts a string of numbers separated by commas and calculates observational statistics (count, min, max, sum, sum of squares (Σx²), square of the sum (Σx)², mean, median, mode, range, mid point, rand, sort up, sort down, rand, population variance, population standard deviation, the sample/experimental variance, sample/experimental standard deviation).
• Frequency Distribution:  This function lets you enter a string of numbers separated by commas, a low and high range and a number of bins.  It then computes how many of the observations are in each of the bins between the high and low values designated. 

General Information

The Herfindahl-Hirschman Index (HHI) is a measure of market concentration in an industry. The market share of each competing firm is squared, and then summed together to give you the concentration index. Its value can range from 0 to 10000, denoting the level of market concentration.

Example

Suppose that furniture sales industry in Maryland is composed of a total of five firms and the market shares of each firm in millions of dollars in product sold are as follows,

• Firm 1 - 36M
• Firm 2 - 27M
• Firm 3 - 15M
• Firm 4 - 13M
• Firm 5 -  9M

Then the following would be inputted into the calculator above: 

• 36,27,15,13,9 

HHI = 2500

As long as the units are consistent  (e.g. millions of dollars), the share numbers can be the short value as in this example.  However, if Firm 5 was only $950K, the inputs would be: 

• 36,27,15,13,0.95

Explanation: In entering the above market shares of the five competing firms of the furniture sales industry, we get that the Herfindahl-Hirschman Index is equal to, HHI= 2500. A HHI of 2500 is indicative of high market concentration in the furniture sales industry. Smaller indices are representative of more perfectly competitive markets, where as higher values are indicate a more monopolistic market.

References

Department of Justice. "Herfindahl-Hirschman Index." U.S. Department of Justice. U.S. Department of Justice, 29 July 2015. Web. 29 June 2016.

Investopedia. "Herfindahl-Hirschman Index - HHI." Investopedia. Investopedia LLC, 20 Nov. 2003. Web. 29 June 2016.