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The Failure of Price Competition in the Turkish Credit Card Market

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  • G. Gulsun Akin
  • Ahmet Faruk Aysan
  • Gazi Ishak Kara
  • Levent Yildiran

Abstract

The failure of competition and the consequent high and sticky interest rates in credit card markets have recently been the subject of considerable debate and research. This paper presents the first regression testing for the existence of price competition in a credit card market to be estimated free of dynamic panel bias using recent quarterly data from Turkey. The estimation reveals that even though the effect of the cost of funds on credit card rates is statistically significant, it is very weak. The paper thus provides empirical evidence for the failure of price competition in the Turkish credit card market.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 46 (2010)
Issue (Month): 0 (May)
Pages: 23-35

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Handle: RePEc:mes:emfitr:v:46:y:2010:i:0:p:23-35

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

Related research

Keywords: banking; credit cards; price competition; system GMM;

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References

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  1. G. Gulsun Akin & Ahmet Faruk Aysan & Gazi Ishak Kara & Levent Yildiran, 2010. "Non-Price Competition in Credit Card Markets Through Bundling and Bank Level Benefits," Working Papers 562, Economic Research Forum, revised Oct 2010.
  2. Aysan, Ahmet Faruk & Müslim, Nusret Ahmet, 2006. "The Failure of Competition in the Credit Card Market in Turkey: The New Empirical Evidence," MPRA Paper 5483, University Library of Munich, Germany.
  3. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
  4. Sherrill Shaffer & Lorein Thomas, 2007. "A reassessment of market power among credit card banks," Applied Financial Economics, Taylor & Francis Journals, vol. 17(9), pages 755-767.
  5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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Cited by:
  1. Akin, Guzin Gulsun & Aysan, Ahmet Faruk & Borici, Denada & Yildiran, Levent, 2013. "Regulate one service, tame the entire market: Credit cards in Turkey," Journal of Banking & Finance, Elsevier, vol. 37(4), pages 1195-1204.

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