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Multimarket spatial competition in the Colombian deposit market

  • Dairo Estrada

    ()

  • Sandra Rozo

    ()

This paper presents a multimarket spatial competition oligopoly model for the Colombian deposit market, in line with the New Empirical Industrial Organization (NEIO) approach. In this framework, banks use price and non-price strategies to compete in the market, which allows us to analyze the country and the regional competitiveness level. The theoretical model is applied to quarterly Colombian data that covers the period between 1996 and 2005. Our results suggest that, although the country deposit market appears to be more competitive than the Nash equilibrium, there are some local areas within the country that present evidence of market power.

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 413.

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Handle: RePEc:bdr:borrec:413
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  14. Shaffer, Sherrill, 1993. "A Test of Competition in Canadian Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 49-61, February.
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  16. Berg, Sigbjorn Atle & Kim, Moshe, 1994. "Oligopolistic Interdependence and the Structure of Production in Banking: An Empirical Evaluation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 309-22, May.
  17. Cabral, Luis M. B., 1995. "Conjectural variations as a reduced form," Economics Letters, Elsevier, vol. 49(4), pages 397-402, October.
  18. Chiappori, Pierre-Andre & Perez-Castrillo, David & Verdier, Thierry, 1995. "Spatial competition in the banking system: Localization, cross subsidies and the regulation of deposit rates," European Economic Review, Elsevier, vol. 39(5), pages 889-918, May.
  19. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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