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Comment on ‘Competition Tests with a Non-Structural Model: The Panzar–Rosse Method Applied to Germany’s Savings Banks’

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  • Neumann Manfred

    (Universität Erlangen-Nürnberg,Erlangen, Germany)

Abstract

In a recent issue of this journal Gischer and Stiele (2009) applied the ‘Test for ‘‘Monopoly’’ Equilibrium’ advanced by Panzar and Rosse (1987) to German savings banks and came up with the claim that savings banks maximize profits under conditions of monopolistic competition in the meaning of Edward Chamberlin. Their proposition is not conclusive since it would require free entry and for savings banks to operate under increasing returns to scale. Available evidence, however, shows them being subject to constant or decreasing returns to scale. The empirical findings of Gischer and Stiele can more convincingly be explained by assuming savings banks abide by their legal goals to pursue the public interest.

Suggested Citation

  • Neumann Manfred, 2011. "Comment on ‘Competition Tests with a Non-Structural Model: The Panzar–Rosse Method Applied to Germany’s Savings Banks’," German Economic Review, De Gruyter, vol. 12(2), pages 239-241, May.
    • Handle: RePEc:bpj:germec:v:12:y:2011:i:2:p:239-241
    DOI: 10.1111/j.1468-0475.2010.00524.x
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