Entry in Independent Submarkets - An Application to the Spanish Retail Banking Market
This paper is aimed at the analysis of the banks’ decisions to open branches in submarkets and, in particular, to test if these decisions can be considered mainly determined by what is happening in each submarket, irrespective of what has happened in other submarkets, as Sutton’s independent submarkets model suggests. With data on the Spanish retail banking sector for the period 1994-98, I specify and estimate a discrete choice model to examine the entry probability of potential new entrants into submarkets. I find that the entry decisions of potential entrants are mainly determined by submarket characteristics, as opposed to entity-specific characteristics. This result is consistent with the assumptions of the theoretical model.
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- Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
- Lucio Fuentelsaz & Jaime Gomez, 2001. "Strategic and Queue effects on Entry in Spanish Banking," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 529-563, December.
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- Timothy F. Bresnahan & Peter C. Reiss, 1987. "Do Entry Conditions Vary across Markets?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3), pages 833-882.
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