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Demand for Bank Services and Market Power in Brazilian Banking

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Author Info
Márcio I. Nakane
Leonardo S. Alencar
Fabio Kanczuk

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Abstract

We use bank-level data to model the demand for bank services in Brazil following the discrete choice literature. A multinomial logit specification is used to study the demand for time deposits, for an aggregate of demand and passbook savings deposits, and for loans. Market for each of these products is defined at the municipality level. In the supply side, we find the absolute price-cost margins consistent with Bertrand competition and with cartel. Our results suggest that even Bertrand competition overestimates the degree of market power in the Brazilian banking industry.

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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 107.

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Date of creation: Jun 2006
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Handle: RePEc:bcb:wpaper:107

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Web page: http://www.bcb.gov.br/?english

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Astrid A. Dick, 2002. "Demand estimation and consumer welfare in the banking industry," Finance and Economics Discussion Series 2002-58, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  2. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  3. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer, vol. 15(3), pages 205-217, November. [Downloadable!] (restricted)
  4. Agnes Belaisch, 2003. "Do Brazilian Banks Compete?," IMF Working Papers 03/113, International Monetary Fund.
  5. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March. [Downloadable!] (restricted)
  6. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Molnár, József, 2008. "Market power and merger simulation in retail banking," Research Discussion Papers 4/2008, Bank of Finland. [Downloadable!]
  2. József Molnár & Márton Nagy & Csilla Horváth, 2007. "A Structural Empirical Analysis of Retail Banking Competition: the Case of Hungary," MNB Working Papers 2007/1, Magyar Nemzeti Bank (The Central Bank of Hungary). [Downloadable!]
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