The Economics of Regional Demarcation in Banking
Abstract
Cooperation among savings and cooperative banks was criticized by the European Commission because of potentially anti-competitive effects. In an industrial economics model of banks taking deposits and giving loans we look at regional demarcation as one of such cooperative practices. There are two adjacent markets with one savings or cooperative bank being focused on each one and one private commercial bank serving both. We find that abolishing regional demarcation indeed increases total loan volume. Savings or cooperative banks always improve market performance and do better without regional demarcation which shields the private commercial bank from aggressive competition by these banks.Download Info
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Paper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number 308.Length: pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:aug:augsbe:0308
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Related research
Keywords: banking; competition; cooperation; non-profit firms;Other versions of this item:
- Simone Raab & Peter Welzel, 2010. "The Economics of Regional Demarcation in Banking," Working Papers 087, Bavarian Graduate Program in Economics (BGPE).
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-23 (All new papers)
- NEP-BAN-2010-01-23 (Banking)
- NEP-COM-2010-01-23 (Industrial Competition)
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