Financial
Herfindahl-Hirschman Index (HHI) formula for market & supplier concentration
Calculate revenue-share HHI on the 0–10,000 scale and the equivalent number of equal-sized firms for a defined market or supplier set.
Compute antitrust HHI (0 to 10,000 scale) directly from raw dollar revenues
HHI is the sum of squared percentage shares. The 2023 US DOJ/FTC guidelines use HHI above 1,800 as highly concentrated and an increase above 100 points as significant. This worksheet calculates concentration, not whether a transaction is lawful.
Use comparable revenues for all firms in the defined market and the same period. A partial supplier list measures concentration within that list, not the entire market. Revenue-based shares may not be the appropriate measure in every market. The algebra below avoids a helper share column; ROUND displays whole HHI points.
| Market Structure (Total = $1,000M) | Firm Shares (%) | Squared Shares Sum (HHI) | Effective Firms (10,000 / HHI) |
|---|---|---|---|
| 4 Skewed Firms ($400, $300, $200, $100) | 40%, 30%, 20%, 10% | 1600+900+400+100 = 3,000 | 3.33 effective competitors |
| 4 Equal Firms ($250 each) | 25%, 25%, 25%, 25% | 625 * 4 = 2,500 | 4.00 effective competitors |
| 10 Equal Firms ($100 each) | 10% each | 100 * 10 = 1,000 | 10.00 equivalent equal-sized firms |
Calculate HHI (0–10,000 scale) directly from raw firm revenues
Evaluates 40^2 + 30^2 + 20^2 + 10^2 = 3,000 directly from revenues [400, 300, 200, 100].
=IF(OR(COUNT(B2:B5)<>4,MIN(B2:B5)<0,SUM(B2:B5)<=0),"Invalid inputs",ROUND(10000 * SUMPRODUCT(B2:B5, B2:B5) / (SUM(B2:B5) ^ 2), 0))Equivalent number of equal-sized firms
Dividing 10,000 by HHI gives the intuitive equivalent count of equal-sized competitors (N_eff = 10,000 / 3,000 = 3.33).
=IF(OR(COUNT(B2:B5)<>4,MIN(B2:B5)<0,SUM(B2:B5)<=0),"Invalid inputs",LET(hhi, 10000 * SUMPRODUCT(B2:B5, B2:B5) / (SUM(B2:B5) ^ 2), ROUND(10000 / hhi, 2)))Try the example
Use the original values or change them to test your understanding.