Operationalizing and Measuring Competition: Determinants of Competition in Private Banking Industry in India
AbstractUsing an appropriate theoretical framework and econometric methodology, the study has sought to measure and model competition in private banking industry in India in an attempt to analyse the process of market dynamics in the industry. The changing scenario of private banking consequent to deregulation provided the motivation behind the study. It used the concept of competition proposed by Stigler (1961) and measured it by Bodenhorn’s (1990) measure of mobility. The study provides a critique of the mechanism of inducing competition, which is implicit in the Narasimham Committee (1991). It then provides the theoretical background of an alternative mechanism based on Structure-Conduct-Performance paradigm, which incorporates basic conditions and strategic groups, apart from including entry, economies of scale, product differentiation and price cost margin, One basic contention of the study is that competition goes beyond “conduct” and encompasses all the four components of S-C-P paradigm: basic conditions, structure, conduct and performance. Accordingly, a three equation simultaneous equation model is used to ultimately estimate the equation of competition through Tobit technique. The result demonstrates that variables related to basic conditions, structure, and conduct and performance influence competition. The study has found evidence against the simplistic relationship between concentration and competition, which remained implicit in the literature. The study also developed a methodology to arrive at market form from an analysis of three aspects of a market and concludes that private banking industry in India is characterized by monopolistic competition.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7463.
Date of creation: Jan 2008
Date of revision:
Competition; Structure-Conduct-Performance; Banking reform; Tobit model;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D49 - Microeconomics - - Market Structure and Pricing - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-08 (All new papers)
- NEP-BAN-2008-03-08 (Banking)
- NEP-COM-2008-03-08 (Industrial Competition)
- NEP-CSE-2008-03-08 (Economics of Strategic Management)
- NEP-MIC-2008-03-08 (Microeconomics)
- NEP-TID-2008-03-08 (Technology & Industrial Dynamics)
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.:
- Sam Peltzman, 1977.
"The Gains and Losses From Industrial Concentration,"
NBER Working Papers
0163, National Bureau of Economic Research, Inc.
- Peltzman, Sam, 1977. "The Gains and Losses from Industrial Concentration," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 229-63, October.
- Hayashi, Fumio & Sims, Christopher A, 1983. "Nearly Efficient Estimation of Time Series Models with Predetermined, but Not Exogenous, Instruments," Econometrica, Econometric Society, vol. 51(3), pages 783-98, May.
- Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
- Heggestad, Arnold A & Rhoades, Stephen A, 1976. "Concentration and Firm Stability in Commercial Banking," The Review of Economics and Statistics, MIT Press, vol. 58(4), pages 443-52, November.
- George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
- Amel, Dean F & Rhoades, Stephen A, 1988. "Strategic Groups in Banking," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 685-89, November.
- Nickell, S.J., 1993.
"Competition and Crporate Performance,"
Economics Series Working Papers
99155, University of Oxford, Department of Economics.
- Bresnahan, T.F & Reiss, P.C., 1989.
"Entry And Competition In Concentrated Markets,"
151, Stanford - Studies in Industry Economics.
- Charles DeLorme & Peter Klein & David Kamerschen & Lisa Ford Voeks, 2003. "Structure, conduct and performance: a simultaneous equations approach," Applied Economics, Taylor & Francis Journals, vol. 35(1), pages 13-20.
- Shepherd, William G, 1972. "The Elements of Market Structure," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 25-37, February.
- Timothy H. Hannan, 1989. "Foundations of the structure-conduct-performance paradigm," Finance and Economics Discussion Series 83, Board of Governors of the Federal Reserve System (U.S.).
- J.A. Bikker & K. Haaf, 2001.
"Competition, Concentration and their Relationship: an EmpiricalAnalysis of the Banking Industry,"
DNB Staff Reports (discontinued)
68, Netherlands Central Bank.
- Bikker, Jacob A. & Haaf, Katharina, 2002. "Competition, concentration and their relationship: An empirical analysis of the banking industry," Journal of Banking & Finance, Elsevier, vol. 26(11), pages 2191-2214, November.
- J.A. Bikker & K. Haaf, 2000. "Competition, concentration and their relationship: an empirical analysis of the banking industry," Research Series Supervision (discontinued) 30, Netherlands Central Bank, Directorate Supervision.
- Fama, Eugene F & Laffer, Arthur B, 1972. "The Number of Firms and Competition," American Economic Review, American Economic Association, vol. 62(4), pages 670-74, September.
- Winter, Sidney G., 1984. "Schumpeterian competition in alternative technological regimes," Journal of Economic Behavior & Organization, Elsevier, vol. 5(3-4), pages 287-320.
- Sarkar, Jayati & Sarkar, Subrata & Bhaumik, Sumon K., 1998. "Does Ownership Always Matter?--Evidence from the Indian Banking Industry," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 262-281, June.
- Lester G. Telser, 1964. "Advertising and Competition," Journal of Political Economy, University of Chicago Press, vol. 72, pages 537.
- Saving, Thomas R, 1970. "Concentration Ratios and the Degree of Monopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(1), pages 139-46, February.
- International Monetary Fund, 2005. "Competition in Indian Banking," IMF Working Papers 05/141, International Monetary Fund.
- Kv, Bhanu Murthy & Deb, Ashis Taru, 2008. "Theoretical Framework Of Competition As Applied To Banking Industry," MPRA Paper 7465, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.