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An Examination of Entry and Competitive Performance in Rural Banking Markets

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  • Robert M. Feinberg
  • Kara M. Reynolds

Abstract

This paper explores the change in the level of competition in rural banking markets since the deregulation that occurred following passage of the Riegle Neal Act of 1994. Using an empirical model that utilizes both the number of banks and the value of deposits in a cross-section of rural markets, we decompose the impact of the entry of new banks into resulting changes in per capita demand and the costs/profits of local banks in both 1994 and 2004. We conclude that the banking market is more competitive today despite the fact that the number of banks may have declined; on average fewer banks are now needed to make rural banking markets competitive than were needed in 1994.

Suggested Citation

  • Robert M. Feinberg & Kara M. Reynolds, 2008. "An Examination of Entry and Competitive Performance in Rural Banking Markets," Working Papers 2008-05, American University, Department of Economics.
  • Handle: RePEc:amu:wpaper:0508
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    Keywords

    Entry; Banking;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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