Market power and banking efficiency in the WAEMU region

The general objective of this article is to analyse the effect of market power on the efficiency of banks in the WAEMU region. Specifically, the aim is to identify the pricing plan of the banking industry and to analyse the effect of the Lerner index on bank cost efficiency. The analysis covers the period from 2010 to 2015 and uses secondary data from balance sheets and income statements as well as BCEAO directories. The GMM method was used to analyse the relationship between market power as measured by the Lerner index and banks’ cost efficiency. The results of this study show, firstly, that WAEMU banks do not practice marginal cost pricing and, secondly, that market power has a positive and significant effect on the efficiency of WAEMU banks.