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Abstract

In this article we develop a microeconomic framework to study the relationships among privatization, competition for deposits and performance in banking. Particularly, we analyze banking privatization when competitive strategies of the Cournot and Stackelberg types are allowed. Our findings show that some conditions are necessary to justify it under the following criteria: (i) efficiency, (ii) market power/financial stability and (iii) consumption availability for depositors. They also show that privatizations are relatively easy to justify when leader-follower relationships are allowed in the banking system. Even government revenues, due to privatization, are higher when these relationships exist.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23179.

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Date of creation: 08 Apr 2010
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Handle: RePEc:pra:mprapa:23179

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Web page: http://mpra.ub.uni-muenchen.de
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Related research

Keywords: banking; privatization; competition; performance; deposits;

Other versions of this item:

Find related papers by JEL classification:

• D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
• G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

This paper has been announced in the following NEP Reports:

• NEP-ALL-2010-06-18 (All new papers)
• NEP-BAN-2010-06-18 (Banking)
• NEP-COM-2010-06-18 (Industrial Competition)

References

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1. Allen N. Berger & Timothy H. Hannan, 1987. "The price-concentration relationship in banking," Research Papers in Banking and Financial Economics 100, Board of Governors of the Federal Reserve System (U.S.).
   
   • Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 291-99, May.
   • Allen N. Berger & Timothy H. Hannan, 1988. "The price-concentration relationship in banking," Finance and Economics Discussion Series 23, Board of Governors of the Federal Reserve System (U.S.).
2. Robert Stein, 1996. "Privatization and the arrangement of city services," Estudios de Economia, University of Chile, Department of Economics, vol. 23(esp Year ), pages 1-23, August.
3. Dowd, Kevin, 1996. "The Case for Financial Laissez-Faire," Economic Journal, Royal Economic Society, vol. 106(436), pages 679-87, May.
4. Paul S. Calem & Gerald A. Carlino, 1989. "The concentration/conduct relationship in bank deposit markets," Working Papers 89-26, Federal Reserve Bank of Philadelphia.
   
   • Calem, Paul S & Carlino, Gerald A, 1991. "The Concentration/Conduct Relationship in Bank Deposit Markets," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 268-76, May.
5. Fry, Maxwell J, 1997. "In Favour of Financial Liberalisation," Economic Journal, Royal Economic Society, vol. 107(442), pages 754-70, May.
6. Hutchison, David E, 1995. "Retail Bank Deposit Pricing: An Intertemporal Asset Pricing Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 217-31, February.
7. Bibhas Saha & Rudra Sensarma, 2004. "Divestment and Bank Competition," Journal of Economics, Springer, vol. 81(3), pages 223-247, 03.

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