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Banks vs. credit unions; dynamic competition in local markets

  • William R. Emmons
  • Frank A. Schmid

One interesting aspect of the financial services industry is that for-profit institutions such as commercial banks compete directly with not-for-profit financial intermediaries such as credit unions. In this article, we analyze competition among banks and between banks and credit unions using a dynamic model of spatial competition. The model allows for the co-existence of (for-profit) banks and (not-for-profit) credit unions. Using annual county-level data on banking market concentration and credit-union participation rates for the period 1989-96, we find empirical evidence of two-way competitive interactions between banks and credit unions.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2000-006.

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Date of creation: 2000
Date of revision:
Handle: RePEc:fip:fedlwp:2000-006
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  1. William R. Emmons & Frank A. Schmid, 1999. "Wages and risk-taking in occupational credit unions: theory and evidence," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 13-32.
  2. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  3. Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 291-99, May.
  4. Amel, Dean F. & Hannan, Timothy H., 1999. "Establishing banking market definitions through estimation of residual deposit supply equations," Journal of Banking & Finance, Elsevier, vol. 23(11), pages 1667-1690, November.
  5. Allen N. Berger & Rebecca Demsetz & Philip E. Strahan, 1998. "The consolidation of the financial services industry: causes, consequences, and implications for the future," Finance and Economics Discussion Series 1998-46, Board of Governors of the Federal Reserve System (U.S.).
  6. Gilbert, R Alton, 1984. "Bank Market Structure and Competition: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 617-44, November.
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