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On the measurement of market power in the banking industry

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  • Delis, Manthos D
  • Staikouras, Christos
  • Varlagas, Panagiotis

Abstract

This paper compares the estimates of the two most widely used non-structural models for market power measurement in banking, namely the conduct parameter method and the revenue test, as applied to a panel of Greek banks over the period 1993-2004. We also propose a dynamic reformulation of these models within a panel data context, in order to address possible statistical problems associated with the dynamic nature of bank-level data. The results suggest that both static methods provide lower estimates of market power relative to their dynamic counterparts. Therefore, the inclusion of some dynamics in the models, even though it increased estimation complexity, helped to reveal some collusive behavior of banks.

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  • Delis, Manthos D & Staikouras, Christos & Varlagas, Panagiotis, 2008. "On the measurement of market power in the banking industry," MPRA Paper 14038, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14038
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    Citations

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    Cited by:

    1. Brissimis, Sophocles N. & Delis, Manthos D., 2011. "Bank-level estimates of market power," European Journal of Operational Research, Elsevier, vol. 212(3), pages 508-517, August.
    2. repec:bla:afrdev:v:29:y:2017:i:2:p:122-138 is not listed on IDEAS
    3. Kumar Kar, Ashim & Bali Swain, Ranjula, 2014. "Competition, performance and portfolio quality in microfinance markets," Working Paper Series 2014:8, Uppsala University, Department of Economics.
    4. Delis, Manthos D., 2010. "Competitive conditions in the Central and Eastern European banking systems," Omega, Elsevier, vol. 38(5), pages 268-274, October.
    5. Memić Deni, 2015. "Banking Competition and Efficiency: Empirical Analysis on the Bosnia and Herzegovina Using Panzar-Rosse Model," Business Systems Research, Sciendo, vol. 6(1), pages 72-92, March.
    6. López-Penabad, Mª Celia & López-Andión, Carmen & Iglesias-Casal, Ana & Maside-Sanfiz, Jose Manuel, 2015. "Securitization in Spain and the wealth effect for shareholders," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 308-323.
    7. repec:eco:journ1:2018-01-7 is not listed on IDEAS
    8. repec:eco:journ1:2017-02-23 is not listed on IDEAS
    9. Michael L. Polemis, 2015. "Does Monopolistic Competition Exist In The Mena Region? Evidence From The Banking Sector," Bulletin of Economic Research, Wiley Blackwell, vol. 67(S1), pages 74-96, December.
    10. Antonis Michis, 2013. "Measuring Market Power in the Banking Industry in the Presence of Opportunity Cost," Working Papers 2013-01, Central Bank of Cyprus.
    11. Malgorzata Pawlowska, 2016. "Market structure, business cycle and bank profitability: evidence on Polish banks," Bank i Kredyt, Narodowy Bank Polski, vol. 47(4), pages 341-364.
    12. Abakumenko Olga V., 2013. "Modelling Competition Level in the Ukrainian Financial Market," Business Inform, RESEARCH CENTRE FOR INDUSTRIAL DEVELOPMENT PROBLEMS of NAS (KHARKIV, UKRAINE), Kharkiv National University of Economics, issue 5, pages 302-310.
    13. 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.
    14. Anthony M. Simpasa, 2013. "Working Paper 168 - Competition and Market Structure in the Zambian Banking Sector," Working Paper Series 447, African Development Bank.
    15. Simpasa, Anthony, 2010. "Characterising market power and its determinants in the Zambian banking indudstry," MPRA Paper 27232, University Library of Munich, Germany.
    16. repec:eee:joecas:v:14:y:2016:i:pa:p:112-127 is not listed on IDEAS
    17. Małgorzata, 2011. "Competition in the Polish banking market prior to recent crisis for the period 1997–2007 – empirical results obtained with the use of three different models," Bank i Kredyt, Narodowy Bank Polski, vol. 42(5), pages 5-40.
    18. Samantas, Ioannis, 2013. "Income-specific estimates of competition in European banking," MPRA Paper 51098, University Library of Munich, Germany.

    More about this item

    Keywords

    Market power estimation; Conduct parameter method; Revenue test; Greek banking sector;

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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