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The Failure of Competition in the Credit Card Market in Turkey: The New Empirical Evidence

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Author Info
Aysan, Ahmet Faruk
Müslim, Nusret Ahmet

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Abstract

The high credit card interest rates in Turkey attracted considerable attention in recent years to regulate the Turkish credit card industry. Before any regulation decision taken, there needs to be better conceptualization and analysis of the Turkish credit card market. First, we highlight the most striking aspects of the Turkish credit card market. After exposing the problem, we benefit from the existing theoretical and empirical studies on the structure of competition in the credit card industry. Potential reasons for the lack of competitions are denoted. Having the existing studies in mind, we finally, construct an empirical model to estimate the market structure in the Turkish credit card industry. Newly disseminated data on the Turkish credit card industry is first introduced in this paper. Our empirical results are based on the panel data set of 22 banks from the second quarter of 2001 to the third quarter of 2005. In addition to random and fixed effects regressions, instrumental variable fixed effect regressions are run on this sample. Our results robustly conclude that the credit cards interest rates in Turkey are economically insensitive to the changes in the cost of fund. This result shows lack of strong competition Turkish credit card market.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5483.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:5483

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Related research
Keywords: Credit Cards; Regulation; Supervision; Financial Markets; Banking; Competition Market Structure.;

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Find related papers by JEL classification:
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
G00 - Financial Economics - - General - - - General
D40 - Microeconomics - - Market Structure and Pricing - - - General

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. Stuart E. Weiner & Julian Wright, 2005. "Interchange fees in various countries: developments and determinants," Payments System Research Working Paper PSR WP 05-01, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  2. C. Emre Alper & Murat Ucer, 1998. "Some Observations on Turkish Inflation: A ''Random Walk'' Down the Past Decade," Working Papers 1998/02, Bogazici University, Department of Economics. [Downloadable!]
  3. Paul S. Calem & Loretta J. Mester, 1995. "Consumer behavior and the stickiness of credit card interest rates," Working Papers 95-10, Federal Reserve Bank of Philadelphia.
    Other versions:
  4. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
  5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  6. Stango, Victor, 2003. "Strategic Responses to Regulatory Threat in the Credit Card Market," Journal of Law & Economics, University of Chicago Press, vol. 46(2), pages 427-52, October.
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  7. Ayadi, O. Felix, 1997. "Adverse selection, search costs and sticky credit card rates," Financial Services Review, Elsevier, vol. 6(1), pages 53-67. [Downloadable!] (restricted)
  8. Sangkyun Park, 1997. "Option value of credit lines as an explanation of high credit card rates," Research Paper 9702, Federal Reserve Bank of New York. [Downloadable!]
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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. Ahmet Faruk Aysan & L. Yildiz, 2006. "The Regulation of the Credit Card Market in Turkey," Working Papers 2006/21, Bogazici University, Department of Economics. [Downloadable!]
    Other versions:
  2. Akin, Guzin Gulsun & Aysan, Ahmet Faruk & Kara , Gazi Ishak & Yildiran , Levent, 2008. "The Failure of Price Competition In The Turkish Credit Card Market," MPRA Paper 17770, University Library of Munich, Germany. [Downloadable!]
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