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On the Measurement of Market Power in the Banking Industry

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  • Manthos D. Delis
  • K. Christos Staikouras
  • Panagiotis T. Varlagas

Abstract

This 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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Article provided by Wiley Blackwell in its journal Journal of Business Finance & Accounting.

Volume (Year): 35 (2008-09)
Issue (Month): 7-8 ()
Pages: 1023-1047

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Handle: RePEc:bla:jbfnac:v:35:y:2008-09:i:7-8:p:1023-1047

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Citations

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Cited by:
  1. Delis, Manthos D, 2008. "Competitive conditions in the Central and Eastern European banking systems," MPRA Paper 13890, University Library of Munich, Germany.
  2. Delis, Manthos D. & Tsionas, Efthymios G., 2009. "The joint estimation of bank-level market power and efficiency," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1842-1850, October.
  3. Samantas, Ioannis, 2013. "Income-specific estimates of competition in European banking," MPRA Paper 51098, University Library of Munich, Germany.
  4. Brissimis, Sophocles N. & Delis, Manthos D., 2011. "Bank-level estimates of market power," European Journal of Operational Research, Elsevier, vol. 212(3), pages 508-517, August.
  5. Simpasa, Anthony, 2010. "Characterising market power and its determinants in the Zambian banking indudstry," MPRA Paper 27232, University Library of Munich, Germany.
  6. Antonis Michis, 2013. "Measuring Market Power in the Banking Industry in the Presence of Opportunity Cost," Working Papers 2013-01, Central Bank of Cyprus.
  7. Anthony M. Simpasa, 2013. "Working Paper 168 - Competition and Market Structure in the Zambian Banking Sector," Working Paper Series 447, African Development Bank.
  8. Małgorzata, 2011. "Competition in the Polish banking market prior to recent crisis for the period 1997–2007 – empirical results obtained with the use of three different models," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 42(5), pages 5-40.

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