IDEAS home Printed from https://ideas.repec.org/a/fip/fedhep/y2002iqivp18-27nv.26no.4.html

Entry and competition in highly concentrated banking markets

Author

Abstract

This article studies conditions of entry and competitive conduct in highly concentrated banking markets. The author estimates the minimum market size at which a second bank, a third, a fourth, and so on, can enter and maintain long-run profitability. The results suggest no evidence of cartel-like behavior, where banks collude and maximize joint monopoly profits, even in markets with only two or three banks. The results are more consistent with the competitive conduct predicted by models of oligopolistic behavior.

Suggested Citation

  • Nicola Cetorelli, 2002. "Entry and competition in highly concentrated banking markets," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 26(Q IV), pages 18-27.
    • Handle: RePEc:fip:fedhep:y:2002:i:qiv:p:18-27:n:v.26no.4
    as

    Download full text from publisher

    File URL: http://www.chicagofed.org/digital_assets/publications/economic_perspectives/2002/4qepart2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Charles W. Calomiris & Thanavut Pornrojnangkool, 2005. "Monopoly-Creating Bank Consolidation? The Merger of Fleet and BankBoston," NBER Working Papers 11351, National Bureau of Economic Research, Inc.
    2. Robert Feinberg, 2009. "Patterns and Determinants of Entry in Rural County Banking Markets," Journal of Industry, Competition and Trade, Springer, vol. 9(2), pages 101-115, June.
    3. Bruce Lyons & Minyan Zhu, 2019. "Consumer Uptake of Internet Banking, Endogenous Market Structure and Regional Integration in Europe," Economics Discussion Papers em-dp2019-14, Department of Economics, University of Reading.
    4. Richard Nahuis & Joëlle Noailly, 2005. "Competition and quality in the notary profession," CPB Document 94, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Robert Feinberg, 2008. "Explaining the Credit Union Entry Decision, and Implications for Performance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 33(1), pages 81-91, August.
    6. Tomasz Bernat, 2008. "Market Creation, Development and Barriers: The Case of Polish Mobile Telephony Market," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 11(29), pages 153-169, (3).
    7. Aki T. Koponen, 2003. "Regional perspectives on office service accessibility in Finnish banking markets: are there differences in service accessibility between the regions?," ERSA conference papers ersa03p304, European Regional Science Association.
    8. Campbell, Dennis & Asís Martínez-Jerez, F. & Tufano, Peter, 2012. "Bouncing out of the banking system: An empirical analysis of involuntary bank account closures," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1224-1235.
    9. Kazumine Kondo & Kozo Harimaya, 2014. "Why Do Japanese Non-Local Regional Banks Enter Other Prefectures Under the Region-Based Relationship Banking Policy?," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 473-485, December.
    10. Richard Nahuis & Joëlle Noailly, 2005. "Competition and quality in the notary profession," CPB Document 94.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    11. Aki Koponen, 2009. "Regional differences in bank office service accessibility: an entry approach," Discussion Papers 42, Aboa Centre for Economics.
    12. Noailly, Joëlle & Nahuis, Richard, 2010. "Entry and competition in the Dutch notary profession," International Review of Law and Economics, Elsevier, vol. 30(2), pages 178-185, June.
    13. John K. Dadzie & Alessandra Ferrari, 2019. "Deregulation, efficiency and competition in developing banking markets: Do reforms really work? A case study for Ghana," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(4), pages 328-340, December.
    14. Paolo Coccorese & Alfonso Pellecchia, 2022. "Deregulation, Entry, and Competition in Local Banking Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(2), pages 171-197, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tin Cheuk Leung & Kwok Ping Ping & Kevin K. Tsui, 2019. "What can deregulators deregulate? The case of electricity," Journal of Regulatory Economics, Springer, vol. 56(1), pages 1-32, August.
    2. Arora, Ashish & Fosfuri, Andrea, 1999. "Exploring the internalization rationale for international investment: wholly owned subsidiary versus technology licensing in the worldwide chemical industry," DEE - Working Papers. Business Economics. WB 6430, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    3. Paul Ellickson & Sanjog Misra, 2012. "Enriching interactions: Incorporating outcome data into static discrete games," Quantitative Marketing and Economics (QME), Springer, vol. 10(1), pages 1-26, March.
    4. Toivanen, Otto & Waterson, Michael, 2000. "Empirical research on discrete choice game theory models of entry: An illustration," European Economic Review, Elsevier, vol. 44(4-6), pages 985-992, May.
    5. Christos Genakos & Mario Pagliero, 2022. "Competition and Pass-Through: Evidence from Isolated Markets," American Economic Journal: Applied Economics, American Economic Association, vol. 14(4), pages 35-57, October.
    6. Shon M. Ferguson, 2015. "Endogenous Product Differentiation, Market Size and Prices," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 45-61, February.
    7. Marc Bourreau & Lukasz Grzybowski & Ángela Muñoz-Acevedo, 2023. "The Efficiency of State Aid for the Deployment of High-Speed Broadband: Evidence from the French Markets," CESifo Working Paper Series 10440, CESifo.
    8. Martin Gaechter & Peter Schwazer & Engelbert Theurl, 2013. "Entry into the Physicians’ Market: Empirical Evidence from the Outpatient Sector in Austria," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 4, pages 245-260, December.
    9. Kim Huynh & Gradon Nicholls & Oleksandr Shcherbakov, 2019. "Explaining the Interplay Between Merchant Acceptance and Consumer Adoption in Two-Sided Markets for Payment Methods," Staff Working Papers 19-32, Bank of Canada.
    10. Sherrill Shaffer, 2002. "Conduct in a Banking Monopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(3), pages 221-238, May.
    11. Varela, Mauricio J., 2018. "The costs of growth: Accelerated growth and crowd-out in the Mexican supermarket industry," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 1-52.
    12. Giovanni Compiani & Philip Haile & Marcelo Sant’Anna, 2020. "Common Values, Unobserved Heterogeneity, and Endogenous Entry in US Offshore Oil Lease Auctions," Journal of Political Economy, University of Chicago Press, vol. 128(10), pages 3872-3912.
    13. Stewart, Hayden & Dong, Diansheng, 2011. "Variation in retail costs for fresh vegetables and salty snacks across communities in the United States," Food Policy, Elsevier, vol. 36(2), pages 128-135, April.
    14. Georg Götz, 2002. "Spatial Competition, Sequential Entry, and Technology choice," Vienna Economics Papers 0215, University of Vienna, Department of Economics.
    15. Stewart, Hayden & Davis, David E., 2005. "Price Dispersion and Accessibility: A Case study of Fast Food," MPRA Paper 7617, University Library of Munich, Germany.
    16. Chad Syverson, 2007. "Prices, Spatial Competition And Heterogeneous Producers: An Empirical Test," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 197-222, June.
    17. Neumann, Manfred & Weigand, Jurgen & Gross, Alexandra & Munter, Markus Thomas, 2001. "Market size, fixed costs and horizontal concentration," International Journal of Industrial Organization, Elsevier, vol. 19(5), pages 823-840, April.
    18. Gotz, Georg, 2005. "Endogenous sequential entry in a spatial model revisited," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 249-261, April.
    19. Sault, Joanne & Toivanen, Otto & Waterson, Michael, "undated". "Market Structure and Entry in Fast Food," Economic Research Papers 269474, University of Warwick - Department of Economics.
    20. repec:osf:socarx:7cvge_v1 is not listed on IDEAS
    21. Robert A. Ritz, 2014. "On Welfare Losses Due to Imperfect Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 62(1), pages 167-190, March.

    More about this item

    Keywords

    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedhep:y:2002:i:qiv:p:18-27:n:v.26no.4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lauren Wiese (email available below). General contact details of provider: https://edirc.repec.org/data/frbchus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.