IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/2004-04.html
   My bibliography  Save this paper

Market structure and competition among retail depository institutions

Author

Listed:

Abstract

We assess the competitive impact that single-market banks and thrift institutions have on multi-market banks (and vice-versa) in 1,884 non- MSA markets. We estimate a model of equilibrium market structure which endogenizes entry for three types: multi-market banks, single-market banks, and thrift institutions. Observed market structures and the solution to an entry-type game identify the parameters of a latent (unobserved) profit function. We find significant evidence of product differentiation-- particularly in the case of thrifts. Furthermore, product differentiation appears to depend upon differences in market geography.

Suggested Citation

  • Andrew M. Cohen & Michael Mazzeo, 2004. "Market structure and competition among retail depository institutions," Finance and Economics Discussion Series 2004-04, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2004-04
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/pubs/feds/2004/200404/200404abs.html
    Download Restriction: no
    File URL: http://www.federalreserve.gov/pubs/feds/2004/200404/200404pap.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Otto Toivanen & Michael Waterson, 2005. "Market Structure and Entry: Where's the Beef?," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 680-699, Autumn.
    2. Federico Ciliberto & Elie Tamer, 2009. "Market Structure and Multiple Equilibria in Airline Markets," Econometrica, Econometric Society, vol. 77(6), pages 1791-1828, November.
    3. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
    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. Timothy F. Bresnahan & Peter C. Reiss, 1990. "Entry in Monopoly Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(4), pages 531-553.
    6. 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.
    7. Robert M. Adams & Kenneth P. Brevoort & Elizabeth K. Kiser, 2007. "Who Competes With Whom? The Case Of Depository Institutions," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 141-167, March.
    8. Elie Tamer, 2003. "Incomplete Simultaneous Discrete Response Model with Multiple Equilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(1), pages 147-165.
    9. Lawrence J. Radecki, 1998. "The expanding geographic reach of retail banking markets," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 15-34.
    10. Michael J. Mazzeo, 2002. "Product Choice and Oligopoly Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 221-242, Summer.
    11. Hannan, Timothy H. & Prager, Robin A., 2004. "The competitive implications of multimarket bank branching," Journal of Banking & Finance, Elsevier, vol. 28(8), pages 1889-1914, August.
    12. Robert M. Feinberg, 2001. "The Competitive Role Of Credit Unions In Small Local Financial Services Markets," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 560-563, August.
    13. Robert Tokle & Joanne Tokle, 2000. "The Influence of Credit Union and Savings and Loan Competition on Bank Deposit Rates in Idaho and Montana," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(4), pages 427-439, December.
    14. Gregory E. Elliehausen & John D. Wolken, 1992. "Banking markets and the use of financial services by households," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages 169-181.
    15. 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.).
    16. Reiss, Peter C, 1996. "Empirical Models of Discrete Strategic Choices," American Economic Review, American Economic Association, vol. 86(2), pages 421-426, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. GIANNETTI, Caterina, 2007. "Intensity of competition and market structure in the Italian banking industry," LIDAM Discussion Papers CORE 2007041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Bart Bronnenberg & Sanjay Dhar & Jean-Pierre Dubé, 2011. "Endogenous sunk costs and the geographic differences in the market structures of CPG categories," Quantitative Marketing and Economics (QME), Springer, vol. 9(1), pages 1-23, March.
    3. William R. Emmons & Frank A. Schmid, 2004. "When for-profits and not-for-profits compete: theory and empirical evidence from retail banking," Supervisory Policy Analysis Working Papers 2004-01, Federal Reserve Bank of St. Louis.
    4. J. Christina Wang & Susanto Basu & John G. Fernald, 2009. "A General-Equilibrium Asset-Pricing Approach to the Measurement of Nominal and Real Bank Output," NBER Chapters, in: Price Index Concepts and Measurement, pages 273-320, National Bureau of Economic Research, Inc.
    5. Rosen, Richard J., 2007. "Banking market conditions and deposit interest rates," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3862-3884, December.
    6. Frederick T. Furlong & John Krainer, 2007. "Regional economic conditions and the variability of rates of return in commercial banking," Working Paper Series 2007-21, Federal Reserve Bank of San Francisco.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kline, Brendan & Tamer, Elie, 2012. "Bounds for best response functions in binary games," Journal of Econometrics, Elsevier, vol. 166(1), pages 92-105.
    2. Dick, Astrid A., 2008. "Demand estimation and consumer welfare in the banking industry," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1661-1676, August.
    3. Philip G. Gayle & Zijun Luo, 2015. "Choosing between Order-of-Entry Assumptions in Empirical Entry Models: Evidence from Competition between Burger King and McDonald's Restaurant Outlets," Journal of Industrial Economics, Wiley Blackwell, vol. 63(1), pages 129-151, March.
    4. Christian Bontemps & Raquel Menezes Bezerra Sampaio, 2020. "Entry games for the airline industry," Post-Print hal-02137358, HAL.
    5. Bontemps, Christian & Kumar, Rohit, 2020. "A geometric approach to inference in set-identified entry games," Journal of Econometrics, Elsevier, vol. 218(2), pages 373-389.
    6. Federico Ciliberto & Zhou Zhang, 2017. "Multiple Equilibria And Deterrence In Airline Markets," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 319-338, January.
    7. Sridhar Narayanan, 2013. "Bayesian estimation of discrete games of complete information," Quantitative Marketing and Economics (QME), Springer, vol. 11(1), pages 39-81, March.
    8. Sridhar Narayanan, 2013. "Bayesian estimation of discrete games of complete information," Quantitative Marketing and Economics (QME), Springer, vol. 11(1), pages 39-81, March.
    9. Davis, Peter, 2006. "Estimation of quantity games in the presence of indivisibilities and heterogeneous firms," Journal of Econometrics, Elsevier, vol. 134(1), pages 187-214, September.
    10. Liran Einav (Stanford University), 2004. "Not All Rivals Look Alike: An Empirical Model for Discrete Games with Asymmetric Rivals," Econometric Society 2004 North American Winter Meetings 626, Econometric Society.
    11. Kenneth P. Brevoort & John D. Wolken, 2008. "Does distance matter in banking?," Finance and Economics Discussion Series 2008-34, Board of Governors of the Federal Reserve System (U.S.).
    12. Doug J. Chung & Kyoungwon Seo & Reo Song, 2023. "Efficient computation of discrete games: Estimating the effect of Apple on market structure," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2245-2263, July.
    13. Yang, Zhou, 2006. "Correlated Equilibrium and the Estimation of Static Discrete Games with Complete Information," MPRA Paper 79395, University Library of Munich, Germany.
    14. Ciliberto, Federico & Jäkel, Ina C., 2021. "Superstar exporters: An empirical investigation of strategic interactions in Danish export markets," Journal of International Economics, Elsevier, vol. 129(C).
    15. Paul L. E. Grieco, 2014. "Discrete games with flexible information structures: an application to local grocery markets," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 303-340, June.
    16. Christian Bontemps & Rohit Kumar, 2019. "A Geometric Approach to Inference in Set-Identified Entry Games," Working Papers hal-02137356, HAL.
    17. Rebeca Juan, 2008. "Competition in Local Markets: Some Evidence from the Spanish Retail Banking Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 145-162, March.
    18. Andrew M. Cohen & Beth A. Freeborn & Brian McManus, 2007. "Competition and Crowding-Out among Public, Non-Profit and For-Profit Organizations: Evidence from Outpatient Substance Abuse Treatment," Working Papers 52, Department of Economics, College of William and Mary.
    19. Astrid A. Dick, 2002. "Demand estimation and consumer welfare in the banking industry," Finance and Economics Discussion Series 2002-58, Board of Governors of the Federal Reserve System (U.S.).
    20. Toivanen, Otto & Waterson, Michael, 2000. "Empirical research on discrete choice game theory models of entry: An illustration," European Economic Review, Elsevier, vol. 44(4-6), pages 985-992, May.

    More about this item

    Keywords

    Banks and banking; American; Banking structure;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2004-04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.