Who competes with whom? the case of depository institutions
Little empirical work exists on the substitutability of depository institutions. In particular, the willingness of consumers to substitute banks for thrifts and to switch between multimarket and single-market institutions (i.e., institutions with large vs. small branch networks) has been of strong interest to policymakers. We estimate a structural model of consumer choice of depository institutions using a panel data set that includes most depository institutions and market areas in the United States over the period 1990-2001. Using a flexible framework, we uncover utility parameters that affect a consumer's choice of institution and measure the degree of market segmentation for two institution subgroups. We use our estimates to calculate elasticities and perform policy experiments that measure the substitutability of firms within and across groupings. We find both dimensions --thrifts and banks, and single- and multimarket institutions-- to be important market segments to consumer choice and, ultimately, to competition in both urban and rural markets.
|Date of creation:||2005|
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References listed on IDEAS
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- Elizabeth Kiser, 2002. "Predicting Household Switching Behavior and Switching Costs at Depository Institutions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(4), pages 349-365, June.
- Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
- 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.).
- Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
- Cohen, Andrew, 2004. "Market structure and market definition: the case of small market banks and thrifts," Economics Letters, Elsevier, vol. 85(1), pages 77-83, October.
- Ivaldi, Marc & Verboven, Frank, 2005.
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- Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers.
- 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.).
- Andrew Cohen, 2004. "Market structure and market definition: the case of small market banks and thrifts," Finance and Economics Discussion Series 2004-02, Board of Governors of the Federal Reserve System (U.S.). Full references (including those not matched with items on IDEAS)
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