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The price-concentration relationship in banking


  • Allen N. Berger
  • Timothy H. Hannan


The commonly observed positive correlation between market concentration and profitability may be explained by noncompetitive pricing behavior, as argued by the structure-performance hypothesis, or by the greater efficiency of firms with dominant market shares, as argued by the efficient-structure hypothesis. By examining the price-concentration relationship instead of the profit-concentration relationship, this paper tests the structure-performance hypothesis in a manner that excludes the efficient-structure hypothesis as an alternative explanation of the results. The results strongly support the structure-performance hypothesis and are robust with respect to model specification, measurement of concentration, and econometric technique. Copyright 1989 by MIT Press.
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  • Allen N. Berger & Timothy H. Hannan, 1988. "The price-concentration relationship in banking," Finance and Economics Discussion Series 23, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:23

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    References listed on IDEAS

    1. Dechert, W. Davis & Nishimura, Kazuo, 1983. "A complete characterization of optimal growth paths in an aggregated model with a non-concave production function," Journal of Economic Theory, Elsevier, vol. 31(2), pages 332-354, December.
    2. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
    3. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
    4. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
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    Prices ; Banking market;


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