Deregulation, Competition and Consumer Welfare in Banking Market: Evidence from Hong Kong

Posted by D. Daniel Sokol

Chun-yu Ho of Boston University - Department of Economics examines competition issues in Deregulation, Competition and Consumer Welfare in Banking Market: Evidence from Hong Kong.

ABSTRACT: This paper examines competition among commercial banks following deregulation in a small open economy. I jointly estimate a system of differentiated product demand and pricing equations, and use conduct parameters to identify market structure. The empirical results show that the banking sector is characterized by the Nash-Bertrand equilibrium in which bank size is important for product differentiation. Following deregulation, bank competition intensifies and cost efficiency improves.