Finance Definition
Herfindahl-Hirschman Index (HHI)
📈 Investing
intermediate

Quick Definition

The Herfindahl-Hirschman Index (HHI) is a measure of market concentration used to determine the level of competition among firms within an industry.

Formula

HHI = Σ (si^2) where 'si' is the market share of the ith firm in percentage terms.

Examples

  • 1In a market where four firms each hold 25% market share, the HHI is calculated as 2500, indicating a moderately competitive market.
  • 2If one firm holds 70% market share and three others share the remaining 30%, the HHI would be significantly higher, suggesting a less competitive market.
  • 3A market with ten firms each holding 10% market share would have an HHI of 1000, reflecting a highly competitive scenario.

Tags

market concentrationcompetitionantitrusteconomicsinvesting
Related Terms
Other terms you might find helpful
Market Share
Market share refers to the percentage of an industry's total sales that is earned by a particular company over a specific time period.
Oligopoly
An oligopoly is a market structure characterized by a small number of firms that dominate the market, leading to limited competition.
Quick Info
Category:Investing
Difficulty:intermediate
Last Updated:6/19/2025