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Household switching behavior at depository institutions: evidence from survey data

  • Elizabeth K. Kiser
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    This article presents descriptive findings from new survey data on households' decisions to change or remain with their providers of checking or savings accounts. The data show that the distribution of household tenure is wide, and that about a third of households have never changed depository institutions. The primary reason reported for changing banks is a household relocation; other reasons are customer service and price factors. Customer service and location are the most frequently cited reasons for remaining with a bank. The importance of location and mobility supports previous survey evidence that the local area is the appropriate market for competitive analysis in banking. The findings presented here are consistent with earlier studies showing that population migration increases competitive pressure on firms and therefore should mitigate the anticompetitive effects of bank mergers.

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    File URL: http://www.federalreserve.gov/pubs/feds/2002/200244/200244abs.html
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    File URL: http://www.federalreserve.gov/pubs/feds/2002/200244/200244pap.pdf
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    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2002-44.

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    Date of creation: 2002
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    Handle: RePEc:fip:fedgfe:2002-44
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    Web page: http://www.federalreserve.gov/

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    1. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
    2. Joseph P. Hughes & Loretta J. Mester, 1998. "Bank Capitalization And Cost: Evidence Of Scale Economies In Risk Management And Signaling," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 314-325, May.
    3. Paul S. Calem & Loretta J. Mester, 1995. "Consumer behavior and the stickiness of credit card interest rates," Working Papers 95-10, Federal Reserve Bank of Philadelphia.
    4. Dean F. Amel & Martha Starr-McCluer, 2001. "Market definition in banking: recent evidence," Finance and Economics Discussion Series 2001-16, Board of Governors of the Federal Reserve System (U.S.).
    5. Paul S. Calem & Gerald A. Carlino, 1989. "The concentration/conduct relationship in bank deposit markets," Working Papers 89-26, Federal Reserve Bank of Philadelphia.
    6. Moshe Kim & Doron Kliger & Bent Vale, 2001. "Estimating Switching Costs and Oligopolistic Behavior," Center for Financial Institutions Working Papers 01-13, Wharton School Center for Financial Institutions, University of Pennsylvania.
    7. Jim Burke, 1998. "Divestiture as an antitrust remedy in bank mergers," Finance and Economics Discussion Series 1998-14, Board of Governors of the Federal Reserve System (U.S.).
    8. Zephirin, M G, 1994. "Switching Costs in the Deposit Market," Economic Journal, Royal Economic Society, vol. 104(423), pages 455-61, March.
    9. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-52, December.
    10. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
    11. Myron L. Kwast & Martha Starr-McCluer & John D. Wolken, 1997. "Market definition and the analysis of antitrust in banking," Finance and Economics Discussion Series 1997-52, Board of Governors of the Federal Reserve System (U.S.).
    12. Amel, Dean F. & Hannan, Timothy H., 1999. "Establishing banking market definitions through estimation of residual deposit supply equations," Journal of Banking & Finance, Elsevier, vol. 23(11), pages 1667-1690, November.
    13. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    14. Curtis Eaton, B. & Lipsey, Richard G., 1989. "Product differentiation," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 12, pages 723-768 Elsevier.
    15. Steven A. Sharpe, 1992. "Consumer switching costs, market structure and prices: the theory and its application in the bank deposit market," Finance and Economics Discussion Series 183, Board of Governors of the Federal Reserve System (U.S.).
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