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Competition Tests with a Non-Structural Model: the Panzar-Rosse Method Applied to Germany's Savings Banks

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  • Horst Gischer
  • Mike Stiele
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    Abstract

    In this paper we adopt the Panzar-Rosse approach to assess the competitive conditions in the German banking market for the period from 1993 to 2002. We suggest several improvements to the empirical application of the approach and show that frequently used empirical models that apply price rather than revenue functions lead to biased results. Using disaggregated annual data from more than 400 savings banks (Sparkassen) the empirical findings indicate monopolistic competition, the cases of monopoly and perfect competition are strongly rejected. Furthermore, small banks seem to enjoy even more market power than larger institutions. Copyright 2008 The Authors. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2008.

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    Bibliographic Info

    Article provided by Verein für Socialpolitik in its journal German Economic Review.

    Volume (Year): 10 (2009)
    Issue (Month): (02)
    Pages: 50-70

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    Handle: RePEc:bla:germec:v:10:y:2009:i::p:50-70

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    Cited by:
    1. Samuel Fosu, 2013. "Banking Competition in Africa: Sub-regional Comparative Studies," Discussion Papers in Economics 13/12, Department of Economics, University of Leicester, revised Jun 2013.
    2. Fosu, Samuel, 2013. "Banking competition in Africa: Subregional comparative studies," Emerging Markets Review, Elsevier, vol. 15(C), pages 233-254.
    3. Moch, Nils, 2013. "Competition in fragmented markets: New evidence from the German banking industry in the light of the subprime crisis," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2908-2919.

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