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Market Power Of Indonesian Banking

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  • Andi Fahmi Lubis

    (University of Indonesia)

Abstract

This study aimed to estimate the degree of market power exercised by commercial banks in the credit market in Indonesia. The model used to answer this study»s objective was the Bresnahan-Lau oligopoly model that uses structural equations to estimate the degree of market power. This model uses a very different approach than Structure-Conduct-Performance (SCP) paradigm commonly used in market power studies. Without using actual cost data and accounting profit, the Bresnahan-Lau model was able to estimate directly the degree of market power from the structural equations. The main result of this study showed that the degree of market power exercised by commercial banks in the credit market is relatively low; in other words, the degree of competition in the credit market in Indonesia is quite high.

Suggested Citation

  • Andi Fahmi Lubis, 2012. "Market Power Of Indonesian Banking," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 14(3), pages 225-244, January.
    • Handle: RePEc:idn:journl:v:14:y:2012:i:3e:p:225-244
    DOI: https://doi.org/10.21098/bemp.v14i3.403
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    More about this item

    Keywords

    market power; oligopoly; Bresnahan-Lau; structure; performance; conduct; SCP;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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