Commercial Banks Competition in Tanzania: Application of the Modified Panzar-Rosse Model

Abstract

This study aims at examining the competition trend in the banking sector in Tanzania. In general, the competition is self-satisfactory as it depicts monopolistic competition though a large share of assets still is dominated by the large banks. This study adopts the Panzar-Rosse model where: the sum of H-statistics is 0.8, i.e., greater than zero but less than one, and, (DEA) efficiency scores is imputed through a regression model to see if there is a relationship between competition and efficiency. In general, the scores indicate a negative relationship between efficiency and competition. The implemented reform programmes have largely improved competition among the banks in the country.

Keywords: Competition, DEA, Regression, Panzar-Rosse