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Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits

  • Dario Focarelli

    (Bank of Italy, Economic Research Department)

  • Fabio Panetta


    (Bank of Italy, Economic Research Department)

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    The general conclusion of the empirical literature is that in-market consolidation generates adverse price changes, harming consumers. Previous studies, however, look only at the short-run pricing impact of consolidation, ignoring all effects that take longer to materialize. Using a database that includes detailed information on the deposit rates of individual banks in local markets for different categories of depositors, we investigate the long-run price effects of M&As for the first time. We find strong evidence that, although consolidation does generate adverse price changes, these are temporary. In the long run efficiency gains dominate over the market power effect, leading to more favorable prices for consumers.

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    Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 448.

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    Date of creation: Jul 2002
    Date of revision:
    Handle: RePEc:bdi:wptemi:td_448_02
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    1. Riccardo De Bonis & Annalisa Ferrando, 2000. "The Italian Banking Structure in the 1990s: Testing the Multimarket Contact Hypothesis," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 29(2), pages 215-241, 07.
    2. Stefano Neri, 2001. "Assessing the effects of monetary and fiscal policy," Temi di discussione (Economic working papers) 425, Bank of Italy, Economic Research and International Relations Area.
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