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Banks as multioutput oligopolies: an empirical evaluation of the retail and corporate banking markets

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  • Sigbjorn Atle Berg
  • Moshe Kim

Abstract

The distinction between retail and corporate banking markets is of much importance in real life banking organizations. The two markets differ with respect to concentration, the importance of informational asymmetries, and the extent of customer mobility. Within a standard conjectural variation model estimated on cost efficient banks as well as on the full sample of banks, the authors empirically characterize the strategic behavior in each of these markets and also focus on cross market interactions to see whether initial moves in one market affect the equilibrium in the other market. They compare their findings to the predictions that would follow from merely considering concentration ratios, such as the Herfindahl index.
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Suggested Citation

  • Sigbjorn Atle Berg & Moshe Kim, 1996. "Banks as multioutput oligopolies: an empirical evaluation of the retail and corporate banking markets," Proceedings 503, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhpr:503
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    Cited by:

    1. Dairo Estrada A. & Sandra V. Rozo V., 2007. "Spatial competition in the Colombian deposit market," COYUNTURA ECONÓMICA, FEDESARROLLO, December.
    2. Nicola Cetorelli & Paolo Angelini, 1999. "Bank competition and regulatory reform: the case of the Italian banking industry," Working Paper Series WP-99-32, Federal Reserve Bank of Chicago.
    3. Subal Kumbhakar & Ana Lozano-Vivas, 2004. "Does deregulation make markets more competitive? Evidence of mark-ups in Spanish savings banks," Applied Financial Economics, Taylor & Francis Journals, vol. 14(7), pages 507-515.
    4. Manthos Delis & Maria Iosifidi & Efthymios G. Tsionas, 2014. "On the Estimation of Marginal Cost," Operations Research, INFORMS, vol. 62(3), pages 543-556, June.
    5. Karina Otero, 2008. "Evolution in the Market Power of Financial Intermediation Services in Argentina: A Structural Empirical Analysis (2005:q1 - 2007:q1)," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(50), pages 7-60, January -.
    6. Pedro Barros & Diana Bonfim & Moshe Kim & Nuno Martins, 2014. "Counterfactual analysis of bank mergers," Empirical Economics, Springer, vol. 46(1), pages 361-391, February.
    7. Kim, Moshe & Kliger, Doron & Vale, Bent, 2003. "Estimating switching costs: the case of banking," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 25-56, January.
    8. Gunther Capelle-Blancard & Olena Havrylchyk, 2017. "Incidence of Bank Levy and Bank Market Power," Review of Finance, European Finance Association, vol. 21(3), pages 1023-1046.
    9. Gunther Capelle-Blancard & Olena Havrylchyk, 2014. "The burden of bank taxation: corporate income tax vs. bank levy," Chapters,in: Taxing Banks Fairly, chapter 4, pages 73-89 Edward Elgar Publishing.
    10. Barbosa, Klenio & de Paula Rocha, Bruno & Salazar, Fernando, 2015. "Assessing competition in the banking industry: A multi-product approach," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 340-362.
    11. Kim, Moshe & Kristiansen, Eirik Gaard & Vale, Bent, 2005. "Endogenous product differentiation in credit markets: What do borrowers pay for?," Journal of Banking & Finance, Elsevier, vol. 29(3), pages 681-699, March.
    12. Carbó, Santiago & Humphrey, David & Maudos, Joaquín & Molyneux, Philip, 2009. "Cross-country comparisons of competition and pricing power in European banking," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 115-134, February.
    13. Hamilton, Stephen F. & Stiegert, Kyle W., 2002. "An empirical test of the rent-shifting hypothesis: the case of state trading enterprises," Journal of International Economics, Elsevier, vol. 58(1), pages 135-157, October.
    14. Ruthenberg, David & Landskroner, Yoram, 2008. "Loan pricing under Basel II in an imperfectly competitive banking market," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2725-2733, December.
    15. Delis, Manthos D. & Tsionas, Efthymios G., 2009. "The joint estimation of bank-level market power and efficiency," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1842-1850, October.
    16. Canhoto, Ana, 2004. "Portuguese banking: A structural model of competition in the deposits market," Review of Financial Economics, Elsevier, vol. 13(1-2), pages 41-63.
    17. Kutlu, Levent & Sickles, Robin C., 2012. "Estimation of market power in the presence of firm level inefficiencies," Journal of Econometrics, Elsevier, vol. 168(1), pages 141-155.
    18. Simpasa, Anthony, 2010. "Characterising market power and its determinants in the Zambian banking indudstry," MPRA Paper 27232, University Library of Munich, Germany.
    19. Karina Otero, 2008. "Market Power Evolution of Financial Intermediation Services in Argentina: Effects of Favorable Macroeconomic Perspectives?," BCRA Working Paper Series 200831, Central Bank of Argentina, Economic Research Department.
    20. Kim, Moshe & Vale, Bent, 2001. "Non-price strategic behavior: the case of bank branches," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1583-1602, December.
    21. repec:eee:quaeco:v:65:y:2017:i:c:p:212-226 is not listed on IDEAS
    22. Park, Kang H., 2009. "Has bank consolidation in Korea lessened competition?," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 651-667, May.

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