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Spillovers from entry: the impact of bank branch network expansion

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  • Joseph Kuehn

Abstract

I study why local banking markets became dominated by multimarket firms following deregulation in the 1990s. I estimate a model of branch entry that allows for spillovers across markets. The spillovers complicate estimation, and so I develop a revealed preference approach that also deals with unobserved firm and market heterogeneity. I then analyze the impact of multimarket banks and find that they increase local competition, but that they also open more branches than single‐market firms, and subsequently offer lower deposit rates. Ultimately, their welfare impact differs across markets based on the availability of outside alternatives and consumer sensitivity to rates.

Suggested Citation

  • Joseph Kuehn, 2018. "Spillovers from entry: the impact of bank branch network expansion," RAND Journal of Economics, RAND Corporation, vol. 49(4), pages 964-994, December.
    • Handle: RePEc:bla:randje:v:49:y:2018:i:4:p:964-994
    DOI: 10.1111/1756-2171.12258
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    Cited by:

    1. Andrej Sokol & Michael Kumhof & Marco Pinchetti & Phurichai Rungcharoenkitkul, 2023. "CBDC policies in open economies," BIS Working Papers 1086, Bank for International Settlements.
    2. , 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence from the US airline Industry," Working Papers 950, Queen Mary University of London, School of Economics and Finance.
    3. Bontemps, Christian & Gualdani, Cristina & Remmy, Kevin, 2023. "Price Competition and Endogenous Product Choice in Networks: Evidence from the US Airline Industry," TSE Working Papers 23-1415, Toulouse School of Economics (TSE).
    4. Yonglong Cai & Fenghua Pan, 2023. "The expansion of Chinese banks along the routes of the Belt and Road Initiative: Following customers and geopolitical relations," Growth and Change, Wiley Blackwell, vol. 54(1), pages 26-44, March.
    5. Joseph Kuehn, 2020. "Strategic Complementarities in Bank Branching Decisions," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 640-692, December.

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