Concentration In The Mobile Operating Systems Market

Concentration In The Mobile Operating Systemsmarketmaurizio Naldiuniv

Analyze the concentration phenomena within the mobile operating systems market using quantitative measures such as the Hirschman-Herfindahl Index (HHI) and the Four-Firm Concentration Ratio (CR4). Assess the current market structure and its evolution over time, identifying whether the market is closer to a monopoly or an oligopoly, with particular attention to the dominant operating systems like Android and Symbian.

Paper For Above instruction

The landscape of mobile operating systems (OS) has become increasingly dominated by a few key players, resulting in a highly concentrated market structure. Understanding the degree of concentration is crucial for evaluating competition dynamics and regulatory implications. This paper analyzes the market concentration of mobile OSs over a nine-year period, employing two key quantitative indices: the Hirschman-Herfindahl Index (HHI) and the Four-Firm Concentration Ratio (CR4).

Market concentration profoundly influences competition, innovation, and consumer choice. A highly concentrated market indicates dominance by a select few firms, potentially leading to monopolistic or oligopolistic behaviors. Conversely, a less concentrated market fosters competition, which is beneficial for consumers and stimulates technological advancements. Therefore, measuring and analyzing concentration trends in the mobile OS market inform regulators and industry stakeholders about market health and guide policy interventions.

Data and Methodology

The analysis is based on quarterly global smartphone sales data sourced from Gartner. The data categorizes sales based on the operating systems of new devices, focusing primarily on dominant OSs, including Windows Mobile, RIM, Symbian, iOS, Android, Bada, and Windows Phone. The combined market share of lesser-known OSs, labeled as 'others,' is included where relevant. The temporal span covers nine years, from 2010 to 2019, capturing significant shifts, particularly the decline of Symbian and the rise of Android.

To quantify market concentration, two indices are applied:

1. The Herfindahl-Hirschman Index (HHI): It sums the squares of individual market shares, providing a measure where values close to 1 indicate near-monopoly, and those near 0 suggest perfect competition (Naldi, 2014). Given incomplete data on all operating systems, bounds are calculated to approximate the HHI, ensuring robustness in analysis (Naldi & Flamini, 2014).
2. The Four-Firm Concentration Ratio (CR4): It sums the market shares of the top four OSs, indicating the level of market dominance by leading firms. Values approaching 1 (or 100%) denote tight oligopoly or monopoly (Antitrust guidelines, 2010).

Results and Discussion

Market share data reveal a transition from Symbian's dominance to Android's supremacy. Initially, Symbian held significant market share, but its decline became pronounced around 2011. Android steadily increased its share, surpassing Symbian, and by 2014, Android's market share plateaued at approximately 80% of new devices. This shift signifies a structural change in the market dynamics—from a multi-player environment to a highly imbalanced oligopoly dominated by Android (Gartner, 2019).

The computed HHI indicates a rising trend in market concentration, exceeding 0.7 in recent years. Such high values categorize the market as highly concentrated according to the US Department of Justice guidelines (2010). The bounds calculated for HHI suggest that the market’s concentration level has consistently increased after 2011, peaking during 2018-2019. This trend underscores the dominance of Android and the marginalization of other OSs, including Windows Mobile, RIM, Bada, and others, which collectively account for less than 1% of the market (Naldi et al., 2014).

The CR4 similarly confirms escalating concentration. Initially, the top four OSs accounted for a smaller share, but since 2013, their combined market share exceeds 99%. The index approaches 1, indicating a market dominated by a few players, with Android alone holding over 80%. This level of dominance aligns with a tight oligopoly or de facto monopoly, raising concerns about reduced competitive pressure and potential barriers to entry for new operating systems (Antitrust, 2010).

The persistent high concentration and dominance of Android significantly affect market competitiveness. When a single OS holds a large majority, it can influence pricing, innovation trajectories, and developer ecosystem dynamics. Regulatory scrutiny, such as the European Commission's objections to Google concerning anti-competitive practices, reflects the implications of such dominance (European Commission, 2018). The market's current state suggests limited scope for new entrants and a potential risk of stagnation in innovation due to reduced competitive incentives.

Conclusion

The quantitative analysis of mobile OS market concentration reveals a market that has evolved into an highly imbalanced oligopoly, dominated by Android. Initially characterized by Symbian's dominance, the landscape shifted dramatically around 2011, leading to a scenario where over 99% of new devices run on the top four OSs, with Android holding more than 80% alone. The high HHI and CR4 values underscore the lack of effective competition, posing regulatory challenges and market efficiency concerns. Policymakers need to monitor these trends to foster a more competitive environment, encouraging innovation and choice while safeguarding consumer interests.

References

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