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

Carbo Valverde, Santiago and Fernández de Guevara y Rodoselovics, Juan and Humphrey, David and Maudos, Joaquin (2009): Estimating the intensity of price and non-price competition in banking. Forthcoming in: Banks and Bank Systems , Vol. 4, No. 2 (2009)

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: non-price competition, banking, market shares
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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