Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, October 16, 2009

Estimating the intensity of price and non-price competition in banking

Posted by D. Daniel Sokol

Carbo Valverde (Universidad de Granada), Santiago Fernández de Guevara y Rodoselovics (Instituto Valenciano de Investigaciones Económicas), Juan David Humphrey (Florida State - Finance), and Joaquin Maudos (Universidad de Valencia) work on Estimating the intensity of price and non-price competition in banking.

ABSTRACT: We model bank oligopoly behaviour using price and non-price competition as strategic variables in an expanded conjectural variations framework. Rivals can respond to changes in both loan and deposit market prices as well as (non-price) branch market shares. The model is illustrated using data for Spain which, over 1986-2002, eliminated interest rate and branching restrictions and set off a competitive race to lock-in expanded market shares. Banks use both interest rates and branches as strategic variables and both have changed over time. We illustrate the results using a regional vs. a national specification for the relevant markets.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/10/estimating-the-intensity-of-price-and-nonprice-competition-in-banking.html

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