HHI (Herfindahl-Hirschman Index)

The Herfindahl-Hirschman Index (HHI) is a measure used to assess how concentrated or competitive a market is. It’s calculated by adding up the squares of the market shares (expressed as percentages) of all firms in the industry. A lower HHI indicates a more competitive market with many small players, while a higher HHI suggests fewer dominant firms and less competition. The HHI helps regulators evaluate the impact of mergers or acquisitions on market competition and consumer choice. It provides a numerical value to understand how evenly or unevenly market power is distributed among companies.