A Structural Empirical Analysis of Retail Banking Competition: the Case of Hungary
AbstractIn this paper we analyze the degree of competition in the Hungarian household credit and deposit markets. We estimate discrete-choice, multinomial logit deposit service and loan demand functions for each bank and calculate the corresponding price elasticities. Two models of the banking industry are considered: a static, differentiated product Nash-Bertrand oligopoly (as non-collusive benchmark) and a cartel. With estimated marginal costs and observed interest rates we calculate the price-cost margins and compare these to the theoretically implied ones. We find that in our sample period the competition in the Hungarian banking sector is low, i.e. price-cost margins are high.
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Bibliographic InfoPaper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2007/1.
Length: 44 pages
Date of creation: 2007
Date of revision:
Demand; discrete choice; product differentiation; banking; market power.;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- 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-2007-03-10 (All new papers)
- NEP-BAN-2007-03-10 (Banking)
- NEP-COM-2007-03-10 (Industrial Competition)
- NEP-DCM-2007-03-10 (Discrete Choice Models)
- NEP-MIC-2007-03-10 (Microeconomics)
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