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Competition in Finnish banking: Two tests

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  • Suominen, Matti

Abstract

This paper extends Bresnahan's (1982) test of competition to the two-product case. Applying this extension, as well as Bresnahan's original one-product test to the Finnish banking industry before and after the deregulation of financial markets produces some interesting results. With the two product model, a degree of imperfect competition is identified both in deposit and loan markets in the latter half of 1980s. The one product test, on the other hand, indicates that the competition was fairly intense before this. Besides the estimates of the degree of competition, 1 find evidence of economies of scope in deposit-taking and lending activities of banks. In addition, the paper discusses the concepts of price and output in banking.

Suggested Citation

  • Suominen, Matti, 1991. "Competition in Finnish banking: Two tests," Bank of Finland Research Discussion Papers 8/1991, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp1991_008
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    References listed on IDEAS

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    6. Lawrence, Colin, 1989. "Banking Costs, Generalized Functional Forms, and Estimation of Economies of Scale and Scope," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(3), pages 368-379, August.
    7. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057, Elsevier.
    8. Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
    9. Orgler, Yair E & Taggart, Robert A, Jr, 1983. "Implications of Corporate Capital Structure Theory for Banking Institutions: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(2), pages 212-221, May.
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    Cited by:

    1. Steen, Frode & Salvanes, Kjell G., 1999. "Testing for market power using a dynamic oligopoly model," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 147-177, February.
    2. Aydin Çelen & Burak Günalp, 2010. "Do Investigations of Competition Authorities Really Increase the Degree of Competition? An Answer From Turkish Cement Market," Prague Economic Papers, Prague University of Economics and Business, vol. 2010(2), pages 150-168.

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