Prices, Nonprices, and Concentration In Commercial Banking

Abstract

Most of the existing literature has found a weak positive relationship between monopoly power and bank prices. The new data set allows us to improve on these studies in several ways. Although banks are multiproduct firms, most studies have been limited to analyzing prices on a single bank product. Such studies have analyzed business loan rates [3, 11, 14], consumer loan rates [6], and demand deposit service charges [1] . By considering only one price, the studies may well be underestimating the total impact of monopoly power on bank performance. Studies that have analyzed the impact of market structure on a whole series of price variables have been hampered by deficiencies in available data that consist of yearly averages of prices [12, 16] . For these studies, the banking product is not defined in a homogeneous manner (e.g. differences in loan size or quality are not considered). Similarly, the studies of the stlucture profWltability relationship [2, 8, 12, 16] may be underestimating the impact of market structure on profits, because banks with monopoly power may choose to trade high profits for reduced risk via

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 87 citations exist upstream.