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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. Bresnahan, Timothy F., 1982. "The oligopoly solution concept is identified," Economics Letters, Elsevier, vol. 10(1-2), pages 87-92.
  2. 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.
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  7. 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.
  8. 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.
  9. Shaffer, Sherrill, 1989. "Competition in the U.S. banking industry," Economics Letters, Elsevier, vol. 29(4), pages 321-323.
  10. Shaffer, Sherrill, 1993. "A Test of Competition in Canadian Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 49-61, February.
  11. 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.
  12. 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.
  13. Shaffer, Sherrill & DiSalvo, James, 1994. "Conduct in a banking duopoly," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1063-1082, December.
  14. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-56, June.
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