Antitrust & Competition Policy Blog

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

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Tuesday, January 10, 2012

Cross-Selling, Switching Costs and Imperfect Competition in British Banks

Posted by D. Daniel Sokol

Tianshu Zhao, Stirling Management School, Kent Matthews, Cardiff Business School and Victor Murinde Birmingham Business School discuss Cross-Selling, Switching Costs and Imperfect Competition in British Banks.

ABSTRACT: This paper attempts to evaluate the competitiveness of British banking in the presence of cross-selling and switching costs during 1993-2008. It presents estimates of a model of banking behaviour that encompasses switching costs as well as cross-selling of loans and off-balance sheet transactions. The evidence from panel estimation of the model lends support to our theoretical priors on the cross-selling behaviour of British banks, which helps explain the rapid growth of non-interest income during the last two decades. We also find that the consumer faced high switching costs in the loan market in the latter part of the sample period, as a result of lower competitiveness.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/01/cross-selling-switching-costs-and-imperfect-competition-in-british-banks-.html

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