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Has Competition in the Japanese Banking Sector Improved?

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Author Info

  • Hirofumi Uchida

    (Indiana University and Wakayama University)

  • Yoshiro Tsutsui

    () (Graduate School of Economics, Osaka University)

Abstract

This paper investigates whether competition in the Japanese banking sector has improved in the last quarter of the 20th century. By estimating the first order condition of profit maximization, together with the cost function and the inverse demand function, we found that competition had improved, especially in the 1970s and in the first half of the 1980s. The results fail to reject a Cournot oligopoly for city banks for most of the period, while they do reject it for regional banks for the overall period. This suggests that competition among city banks was stronger than that among regional banks.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0209R.pdf
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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 02-09-Rev.

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Length: 37 pages
Date of creation: Jun 2002
Date of revision: Sep 2003
Handle: RePEc:osk:wpaper:0209r

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: Japanese banks; degree of competition; loan market.;

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  1. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99.
  2. Molyneux, Philip & Thornton, John & Michael Llyod-Williams, D., 1996. "Competition and market contestability in Japanese commercial banking," Journal of Economics and Business, Elsevier, vol. 48(1), pages 33-45, February.
  3. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  4. Sherrill Shaffer & James DiSalvo, 1991. "Conduct in a banking duopoly," Working Papers 91-12, Federal Reserve Bank of Philadelphia.
  5. De Bandt, Olivier & Davis, E. Philip, 2000. "Competition, contestability and market structure in European banking sectors on the eve of EMU," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1045-1066, June.
  6. Shaffer, Sherrill, 1989. "Competition in the U.S. banking industry," Economics Letters, Elsevier, vol. 29(4), pages 321-323.
  7. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
  8. Nicola Cetorelli & Paolo Angelini, 1999. "Bank competition and regulatory reform: the case of the Italian banking industry," Working Paper Series WP-99-32, Federal Reserve Bank of Chicago.
  9. Zardkoohi, Asghar & Fraser, Donald R, 1998. "Geographical Deregulation and Competition in U.S. Banking Markets," The Financial Review, Eastern Finance Association, vol. 33(2), pages 85-98, May.
  10. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  11. Shaffer, Sherrill, 1993. "A Test of Competition in Canadian Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 49-61, February.
  12. Kano, Masaji & Tsutsui, Yoshiro, 2003. "Geographical segmentation in Japanese bank loan markets," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 157-174, March.
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