Contestability, Technology and Banking
Abstract
We estimate the effect of internet penetration on retail bank margins in the euro area. Based on an adapted Baumol [1982] type contestability model, we argue that the internet has reduced sunk costs and therefore increased contestability in retail banking. We test this conjecture by estimating the model using semi-aggregated data for a panel of euro area countries. We utilise time series and cross-sectional variation in internet penetration. We find support for an increase in contestability in deposit markets, and no effect for loan markets. The paper suggests that for time and savings deposits, the presence of brick and mortar bank branches may no longer be of first order importance for the assessment of the competitive structure of the market. --Download Info
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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 09-007.Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:zbw:zewdip:7532
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Related research
Keywords: Banking structure; Contestability; Internet;Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-10 (All new papers)
- NEP-BAN-2009-06-10 (Banking)
- NEP-COM-2009-06-10 (Industrial Competition)
- NEP-IND-2009-06-10 (Industrial Organization)
- NEP-MIC-2009-06-10 (Microeconomics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Degryse, H.A. & Ongena, S., 2002.
"Distance, Lending Relationships and Competition,"
Discussion Paper
2002-16, Tilburg University, Center for Economic Research.
- Hans Degryse & Steven Ongena, 2005. "Distance, Lending Relationships, and Competition," Journal of Finance, American Finance Association, vol. 60(1), pages 231-266, 02.
- Degryse, H.A. & Ongena, S., 2003. "Distance, Lending Relationships, and Competition," Discussion Paper 2003-123, Tilburg University, Center for Economic Research.
- Hans Degryse & Steven Ongena, 2002. "Distance, Lending Relationships, and Competition," CSEF Working Papers 80, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Degryse, Hans & Ongena, S, 2002. "Distance, lending relationships and competition," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/121585, Katholieke Universiteit Leuven.
- Degryse, Hans & Ongena, S, 2005. "Distance, lending relationships, and competition," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/101442, Katholieke Universiteit Leuven.
- Degryse, Hans & Ongena, Steven, 2004.
"The Impact of Competition on Bank Orientation and Specialization,"
CEPR Discussion Papers
4543, C.E.P.R. Discussion Papers.
- Degryse, Hans & Ongena, S, 2004. "The impact of competition on bank orientation and specialization," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/121547, Katholieke Universiteit Leuven.
- Degryse, H.A. & Ongena, S., 2003. "The Impact of Competition on Bank Orientation and Specialization," Discussion Paper 2003-108, Tilburg University, Center for Economic Research.
- Paul Edelstein & Donald P. Morgan, 2006. "Local or state? Evidence on bank market size using branch prices," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 15-25.
- Tumer-Alkan, G., 2008. "Essays on Banking," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3160796, Tilburg University.
- Hans Degryse & Steven Ongena, 2004. "The Impact of Competition on Bank Orientation and Specialization (new titel: The impact of competition on bank orientation)," CESifo Working Paper Series 1119, CESifo Group Munich.
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