Tuesday, January 10, 2012
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.