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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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    File URL: http://www.federalreserve.gov/pubs/feds/2002/200258/200258abs.html
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    File URL: http://www.federalreserve.gov/pubs/feds/2002/200258/200258pap.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 2002-58.

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    Date of creation: 2002
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    Handle: RePEc:fip:fedgfe:2002-58
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    5. Sherrill Shaffer, 1990. "A test of competition in Canadian banking," Working Papers 90-18, Federal Reserve Bank of Philadelphia.
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    23. Gregory E. Elliehausen & John D. Wolken, 1990. "Banking markets and the use of financial services by small and medium- sized businesses," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 801-817.
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