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Market power in local banking monopolies

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  • Coccorese, Paolo

Abstract

By means of two NEIO techniques, this paper analyzes the conduct of a group of Italian single-branch banks operating as monopolists in small local areas (municipalities) in the years 1988-2005, in order to assess pricing behavior in highly concentrated banking markets. Both tests strongly reject the hypothesis of pure monopoly pricing: regardless the advantageous condition, these banks are able to exploit only partially their market power, principally by reason of the nearby competition, the latest banking consolidation trend and the local presence of big banks. Employing another sample, we also show that in duopolistic markets the conduct of single-branch banks is virtually competitive.

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Bibliographic Info

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

Volume (Year): 33 (2009)
Issue (Month): 7 (July)
Pages: 1196-1210

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Handle: RePEc:eee:jbfina:v:33:y:2009:i:7:p:1196-1210

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Banking Monopoly Market structure Conduct;

References

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Citations

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Cited by:
  1. Roberto Fuentes & Rubén Hernández-Murillo & Gerard Llobet, 2007. "Strategic online-banking adoption," Working Papers 2006-058, Federal Reserve Bank of St. Louis.
  2. Andrea Filippo Presbitero & Alberto Zazzaro, 2009. "Competition and Relationship Lending: Friends or Foes?," Mo.Fi.R. Working Papers 13, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  3. Barbosa, Klenio de Souza & Rocha, Bruno & Salazar, Fernando, 2013. "Assessing competition in the banking industry: A multi-product approach," Textos para discussão 339, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  4. 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.
  5. Anthony M. Simpasa, 2013. "Working Paper 168 - Competition and Market Structure in the Zambian Banking Sector," Working Paper Series 447, African Development Bank.
  6. Rezitis, Anthony N., 2010. "Evaluating the state of competition of the Greek banking industry," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(1), pages 68-90, February.
  7. Totzek, Alexander, 2009. "Banks and early deposit withdrawals in a new Keynesian framework," Economics Working Papers 2009,08, Christian-Albrechts-University of Kiel, Department of Economics.
  8. Goddard, John & Wilson, John O.S., 2009. "Competition in banking: A disequilibrium approach," Journal of Banking & Finance, Elsevier, vol. 33(12), pages 2282-2292, December.
  9. Mamonov, Mikhail, 2010. "Testing for Competition in the Russian Banking Sector within Panzar-Rosse approach: theoretical and empirical framework," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 20(4), pages 3-27.
  10. Vallascas, Francesco & Hagendorff, Jens, 2011. "The impact of European bank mergers on bidder default risk," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 902-915, April.
  11. Hankir, Yassin & Rauch, Christian & Umber, Marc P., 2011. "Bank M&A: A market power story?," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2341-2354, September.
  12. Ogura, Yoshiaki, 2012. "Lending competition and credit availability for new firms: Empirical study with the price cost margin in regional loan markets," Journal of Banking & Finance, Elsevier, vol. 36(6), pages 1822-1838.
  13. David VanHoose, 2013. "Implications of Shifting Retail Market Shares for Loan Monitoring in a Dominant-Bank Model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(3), pages 291-316, 07.
  14. Benjamin M. Tabak & Dimas M. Fazio & Daniel O. Cajueiro, 2011. "The Relationship Between Banking Market Competition and Risk-taking: Do Size and Capitalization Matter?," Working Papers Series 261, Central Bank of Brazil, Research Department.
  15. Coccorese, Paolo, 2012. "Banks as ‘fat cats’: Branching and price decisions in a two-stage model of competition," Journal of Economics and Business, Elsevier, vol. 64(5), pages 338-363.
  16. Scott, Jonathan A. & Dunkelberg, William C., 2010. "Competition for small firm banking business: Bank actions versus market structure," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2788-2800, November.
  17. Simpasa, Anthony, 2010. "Characterising market power and its determinants in the Zambian banking indudstry," MPRA Paper 27232, University Library of Munich, Germany.
  18. Coccorese, Paolo & Pellecchia, Alfonso, 2013. "Multimarket contact, competition and pricing in banking," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 187-214.
  19. T.V.S. Ramamohan Rao, 2012. "Firm Specific Monopoly Power in Differentiated Oligopoly," Journal of Quantitative Economics, The Indian Econometric Society, vol. 10(1), pages 85-97, January.

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