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Market Structure And Intensity Of Price Competition In Eu Banking

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  • Giovanni Alberto Tabacco

Abstract

This article analyzes both determinants of market structure and the intensity of price competition in the European Union (EU) banking industry. For this purpose, the first part of the article applies John Sutton's framework for empirically measuring the relationship between market size and market concentration. Next, the analysis turns to assessing the degree of price competition by applying a method of measuring banking competition that I have recently developed. Results suggest that there is a null relationship between market size and concentration, and that the estimated lower bound to concentration is well above zero. These two pieces of empirical evidence support Sutton's endogenous sunk costs model. Moreover, empirical estimates of a measure of competition—distance to the lower bound to concentration—suggest that the majority of EU national banking markets have low intensity of price competition. In contrast, Estonia, Netherlands, Finland, and Lithuania appear to have the most competitive banking industries.

Suggested Citation

  • Giovanni Alberto Tabacco, 2015. "Market Structure And Intensity Of Price Competition In Eu Banking," Journal of Competition Law and Economics, Oxford University Press, vol. 11(2), pages 353-363.
    • Handle: RePEc:oup:jcomle:v:11:y:2015:i:2:p:353-363.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhv007
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    Cited by:

    1. Ivana Blazkova, & Ondrej Dvoulety, 2017. "Is the price-cost margin affected by the market concentration? Evidence from the Czech food and beverages industry," Business and Economic Horizons (BEH), Prague Development Center, vol. 13(2), pages 256-269, May.
    2. Tabacco, Giovanni Alberto, 2015. "Does competition spur innovation? Evidence from labor productivity data for the banking industry," Economics Letters, Elsevier, vol. 132(C), pages 45-47.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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