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The competitive implications of multimarket bank branching

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  • Hannan, Timothy H.
  • Prager, Robin A.

Abstract

Regulators and research economists typically view retail banking markets as locally limited, spanning an area that can often be approximated by a metropolitan area or a rural county. Banks are assumed to set retail prices based on the conditions of supply and demand prevailing within these local market areas. However, recent studies have found evidence that large, multimarket banking organizations tend to offer uniform interest rates for retail deposit accounts of a particular type throughout the area that they serve, at least within a given state. This uniform pricing phenomenon raises questions about the continued relevance of the concept of local banking markets for both research and antitrust purposes. We address this issue by developing and empirically testing a model to determine the effects of the presence of multimarket banks in a local geographic market on the deposit interest rates offered by single-market banks serving that same local market.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 28 (2004)
Issue (Month): 8 (August)
Pages: 1889-1914
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eee:jbfina:v:28:y:2004:i:8:p:1889-1914

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For corrections or technical questions regarding this item, or to correct its listing, contact: (Jeroen Loos).

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Guest Post: A New Financial Foundation?
    by Leo Kolivakis in Naked capitalism on 2009-06-16 11:40:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
  1. Andrew Cohen & Michael J. Mazzeo, 2004. "Competition, product differentiation and quality provision: an empirical equilibrium analysis of bank branching decisions," Finance and Economics Discussion Series 2004-46, Board of Governors of the Federal Reserve System (U.S.).
  2. William Keeton, 2003. "The role of community banks in the U.S. economy," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 15-43.
  3. Steven J. Pilloff, 2004. "Bank merger activity in the United States, 1994-2003," Staff Studies 176, Board of Governors of the Federal Reserve System (U.S.).
  4. Timothy H. Hannan & Robert M. Adams, 2011. "Consumer Switching Costs And Firm Pricing: Evidence From Bank Pricing Of Deposit Accounts," Journal of Industrial Economics, Wiley Blackwell, vol. 59(2), pages 296-320, 06.
  5. Robert M. Feinberg & A.F.M. Ataur Rahman, 2006. "Are Credit Unions Just Small Banks? Determinants of Loan Rates in Local Consumer Lending Markets," Eastern Economic Journal, Eastern Economic Association, vol. 32(4), pages 647-659, Fall.
  6. Richard J. Rosen, 2003. "Banking market conditions and deposit interest rates," Working Paper Series WP-03-19, Federal Reserve Bank of Chicago.
  7. Kenneth P. Brevoort & John D. Wolken, 2008. "Does distance matter in banking?," Finance and Economics Discussion Series 2008-34, Board of Governors of the Federal Reserve System (U.S.).
  8. Robert DeYoung & William Hunter & Gregory Udell, 2004. "The Past, Present, and Probable Future for Community Banks," Journal of Financial Services Research, Springer, vol. 25(2), pages 85-133, April.
  9. Gianni De Nicoló & John H. Boyd & Abu M. Jalal, 2009. "Bank Competition, Risk and Asset Allocations," IMF Working Papers 09/143, International Monetary Fund.
  10. Andrew M. Cohen & Michael J. Mazzeo, 2004. "Using market structure to assess differentiation between retail depository institutions," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 255-266.
  11. Karlo Kauko, 2005. "Bank interest rates in a small European economy: Some exploratory macro level analyses using Finnish data," Finance 0508020, EconWPA.
  12. Kwangwoo Park & George G. Pennachi, 2004. "Harming depositors and helping borrowers: the disparate impact of bank consolidation," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 227-242.
  13. Hannan, Timothy H. & Prager, Robin A., 2006. "Multimarket bank pricing: An empirical investigation of deposit interest rates," Journal of Economics and Business, Elsevier, vol. 58(3), pages 256-272.
  14. Timothy Hannan, 2003. "Changes in Non-Local Lending to Small Business," Journal of Financial Services Research, Springer, vol. 24(1), pages 31-46, August.
  15. Erik Heitfield & Robin Prager, 2004. "The Geographic Scope of Retail Deposit Markets," Journal of Financial Services Research, Springer, vol. 25(1), pages 37-55, February.
  16. Paul Edelstein & Donald P. Morgan, 2006. "Local or state? Evidence on bank market size using branch prices," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 15-25.
  17. Andew Cohen & Michael Mazzeo, 2004. "Market structure and competition among retail depository institutions," Finance and Economics Discussion Series 2004-04, Board of Governors of the Federal Reserve System (U.S.).
  18. Erik Heitfield & Robin A. Prager, 2002. "The geographic scope of retail deposit markets," Finance and Economics Discussion Series 2002-49, Board of Governors of the Federal Reserve System (U.S.).

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