The tables below contain information on the market shares of firms in the Teleco

Question

The tables below contain information on the market shares of firms in the Telecom and Banking Industry in Ghana. a) Compute the four-firm concentration ratio (C4) for both industries. Interpret your answer. b) Compute the Herfindahl-Hirschman index (HHI) for both industries. c) Using your answers from parts (a) and (b) determine which industry is has higher concentration. d) Which industry is more competitive and why? Table 1: Total Mobile data market share for June 2017 No Company Market Shares 1 MTN 56.29% 2 Vodafone 16.48% 3 Airtel 13.70% 4 Tigo 12.37% 5 Glo 1.11% 6 Expresso 0.05% 4 Table 2: Market share of industry Deposit, 2016 Bank Name Market Share 1 EBG 12.1% 2 GCB 8.7% 3 BBGL 8.7% 4 STANBIC 8.3% 5 Fidelity 6.6% 6 SCB 6.5% 7 UBA 6.1% 8 ZBL 5.4% 9 UGL 5.3% 10 CAL 4.8% 11 ABG 4.1% 12 SG-GH 3.7% 13 HFC 3.2% 14 UMB 2.9% 15 PBL 2.7% 16 FABL 2.4% 17 GTB 2.3% 18 BOA 1.4% 19 GNB 1.3% 20 BSIC 0.9% 21 FBN 0.9% 22 EBL 0.6% 23 SBL 0.5% 24 FNB 0.3% 25 BARODA 0.3% Source: Ghana Banking Survey 2017

Explanation / Answer

a.

For table A:

C4 = The aggregate of market share of top 4 firms

      = 56.29% + 16.48% + 13.70% + 12.37%

      = 98.84% (Answer)

Interpretation: The top 4 firms in the industry are having 98.84% share in the whole industry. Since the market concentration is very high, this is very near to a monopoly industry. (Answer)

For table B:

C4 = The aggregate of market share of top 4 firms

      = 12.1% + 8.7% + 8.7% + 8.3%

      = 37.8% (Answer)

Interpretation: The top 4 firms in the industry are having 37.8% share in the whole industry. Since the market concentration is low, the industry is in perfect competition. (Answer)

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