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Has competition in the Japanese banking sector improved?

  • Uchida, Hirofumi
  • Tsutsui, Yoshiro

This paper investigates whether competition in the Japanese banking sector has improved in the last quarter of the 20th century. By estimating the first order condition of profit maximization, together with the cost function and the inverse demand function, we found that competition had improved, especially in the 1970s and in the first half of the 1980s. The results fail to reject a Cournot oligopoly for city banks for most of the period, while they do reject it for regional banks for the overall period. This suggests that competition among city banks was stronger than that among regional banks.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 29 (2005)
Issue (Month): 2 (February)
Pages: 419-439

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Handle: RePEc:eee:jbfina:v:29:y:2005:i:2:p:419-439
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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  1. Kano, Masaji & Tsutsui, Yoshiro, 2003. "Geographical segmentation in Japanese bank loan markets," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 157-174, March.
  2. Sherrill Shaffer & James DiSalvo, 1991. "Conduct in a banking duopoly," Working Papers 91-12, Federal Reserve Bank of Philadelphia.
  3. Zardkoohi, Asghar & Fraser, Donald R, 1998. "Geographical Deregulation and Competition in U.S. Banking Markets," The Financial Review, Eastern Finance Association, vol. 33(2), pages 85-98, May.
  4. De Bandt, Olivier & Davis, E. Philip, 2000. "Competition, contestability and market structure in European banking sectors on the eve of EMU," Journal of Banking & Finance, Elsevier, vol. 24(6), pages 1045-1066, June.
  5. Sherrill Shaffer, 1990. "A test of competition in Canadian banking," Working Papers 90-18, Federal Reserve Bank of Philadelphia.
  6. Molyneux, Philip & Thornton, John & Michael Llyod-Williams, D., 1996. "Competition and market contestability in Japanese commercial banking," Journal of Economics and Business, Elsevier, vol. 48(1), pages 33-45, February.
  7. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-56, June.
  8. Paolo Angelini & Nicola Cetorelli, 2000. "Bank Competition and Regulatory Reform: The Case of the Italian Banking Industry," Temi di discussione (Economic working papers) 380, Bank of Italy, Economic Research and International Relations Area.
  9. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
  10. Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-87, August.
  11. Toshiyuki Souma & Yoshiro Tsutsui, 2005. "Recent Competition in the Japanese Life Insurance Industry," ISER Discussion Paper 0637, Institute of Social and Economic Research, Osaka University.
  12. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  13. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  14. Shaffer, Sherrill, 1989. "Competition in the U.S. banking industry," Economics Letters, Elsevier, vol. 29(4), pages 321-323.
  15. Lau, Lawrence J., 1982. "On identifying the degree of competitiveness from industry price and output data," Economics Letters, Elsevier, vol. 10(1-2), pages 93-99.
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