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On the measurement of market power in the banking industry

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Author Info
Delis, Manthos D
Staikouras, Christos
Varlagas, Panagiotis

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Abstract

This paper compares the estimates of the two most widely used non-structural models for market power measurement in banking, namely the conduct parameter method and the revenue test, as applied to a panel of Greek banks over the period 1993-2004. We also propose a dynamic reformulation of these models within a panel data context, in order to address possible statistical problems associated with the dynamic nature of bank-level data. The results suggest that both static methods provide lower estimates of market power relative to their dynamic counterparts. Therefore, the inclusion of some dynamics in the models, even though it increased estimation complexity, helped to reveal some collusive behavior of banks.

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File URL: http://mpra.ub.uni-muenchen.de/14038/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14038.

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Date of creation: 12 Jun 2008
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Publication status: Published in Journal of Business Finance and Accounting 7.35(2008): pp. 1023-1047
Handle: RePEc:pra:mprapa:14038

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Related research
Keywords: Market power estimation; Conduct parameter method; Revenue test; Greek banking sector;

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Find related papers by JEL classification:
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

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Cited by:
(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. Sophocles N. Brissimis & Manthos D. Delis, 2009. "Bank-Level Estimates of Market Power," Working Papers 93, Bank of Greece. [Downloadable!]
  2. Delis, Manthos D, 2008. "Competitive conditions in the Central and Eastern European banking systems," MPRA Paper 13890, University Library of Munich, Germany. [Downloadable!]
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