On the Measurement of Market Power in the Banking Industry
AbstractThis paper compares the estimates of the two most widely used non-structural models for market power measurement in banking, namely the conduct parameter method and the revenue test, as applied to three panels of Greek, Latvian and Spanish banks over the period 1993-2004. We also propose a dynamic reformulation of these models within a panel data context, in order to address possible statistical problems associated with the dynamic nature of bank-level data. The results suggest that both static methods provide lower estimates of market power relative to their dynamic counterparts. Therefore, the inclusion of some dynamics in the models, even though it increased estimation complexity, helped to reveal some collusive behavior of banks. Copyright (c) 2008 The Authors Journal compilation (c) 2008 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.
Volume (Year): 35 (2008-09)
Issue (Month): 7-8 ()
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Other versions of this item:
- Delis, Manthos D & Staikouras, Christos & Varlagas, Panagiotis, 2008. "On the measurement of market power in the banking industry," MPRA Paper 14038, University Library of Munich, Germany.
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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