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Bank-Level Estimates of Market Power

  • Sophocles N. Brissimis

    ()

    (Bank of Greece)

  • Manthos D. Delis

    (University of Ioannina)

The aim of this study is to provide an empirical methodology for the estimation of market power of individual banks. The new method employs the well-known model of Panzar and Rosse (1987) and proposes its estimation using the local regression technique. Thus, a number of restrictive assumptions regarding the properties of the production function of banks are relaxed, while the method proves successful in providing reasonable estimates of bank-level market power when applied to a large panel of banks of transition countries. The empirical results suggest that many banks in the sample deviate significantly from competitive practices and that market power varies substantially across banks in each country. Country averages of the bank-level results exhibit a very close relationship with standard, industry-level Panzar-Rosse estimates.

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Paper provided by Bank of Greece in its series Working Papers with number 93.

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Length: 26 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:bog:wpaper:93
Contact details of provider: Web page: http://www.bankofgreece.gr

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