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Demand estimation and consumer welfare in the banking industry

  • Astrid A. Dick
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    This paper estimates a structural demand model for commercial bank deposit services. Following the discrete choice literature, consumer decisions are based on prices and bank characteristics. The results, based on the U.S. for 1993-1999, indicate that, with respect to prices, consumers respond to deposit rates, and to a lesser extent, to account fees, in choosing a depository institution. Moreover, consumers respond favorably to the branch staffing and geographic density, as well as to the bank's age, size, and geographic diversification. In light of the banks' responses to regulatory changes throughout the period, most markets experience a slight increase in welfare.

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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 2002-58.

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    Date of creation: 2002
    Date of revision:
    Handle: RePEc:fip:fedgfe:2002-58
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    22. Robert M. Adams & Lars-Hendrik Roeller & Robin C. Sickles, 2000. "Measuring Market Power in Input and Output Markets: An Empirical Application to Banking," Econometric Society World Congress 2000 Contributed Papers 1466, Econometric Society.
    23. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
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    25. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
    26. repec:adr:anecst:y:1994:i:34:p:06 is not listed on IDEAS
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