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Cross-Selling, Switching Costs and Imperfect Competition in British Banks

  • Zhao, Tianshu
  • Matthews, Kent

    ()

    (Cardiff Business School)

  • Murinde, Victor

This paper attempts to evaluate the competitiveness of British banking in the presence of cross-selling and switching costs during 1993-2008. It presents estimates of a model of banking behaviour that encompasses switching costs as well as cross-selling of loans and off-balance sheet transactions. The evidence from panel estimation of the model lends support to our theoretical priors on the cross-selling behaviour of British banks, which helps explain the rapid growth of non-interest income during the last two decades. We also find that the consumer faced high switching costs in the loan market in the latter part of the sample period, as a result of lower competitiveness.

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Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2011/29.

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Length: 32 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:cdf:wpaper:2011/29
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Web page: http://business.cardiff.ac.uk/research/academic-sections/economics/working-papers

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