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Multistrategic Spatial Competition in Banking

Author

Listed:
  • Moshe Kim
  • Ana Lozano-Vivas
  • Antonio Morales

Abstract

This paper presents a model whereby banking firms use various strategies (price and non-price) simultaneously in a monopolistically competitive model of spatial competition when the various strategies are used across different markets in the presence of a multioutput technology. The theoretical model is estimated with Spanish data pertaining to the pre- and post-deregulatory periods in order to investigate the effects of deregulation of both interest rates and branches on the (differential) strategic conduct of private and savings bank.

Suggested Citation

  • Moshe Kim & Ana Lozano-Vivas & Antonio Morales, 2007. "Multistrategic Spatial Competition in Banking," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(3), pages 351-366.
    • Handle: RePEc:taf:ijecbs:v:14:y:2007:i:3:p:351-366
    DOI: 10.1080/13571510701597502
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    References listed on IDEAS

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    1. Pita Barros, Pedro, 1999. "Multimarket competition in banking, with an example from the Portuguese market," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 335-352, April.
    2. Kim, Moshe & Vale, Bent, 2001. "Non-price strategic behavior: the case of bank branches," International Journal of Industrial Organization, Elsevier, vol. 19(10), pages 1583-1602, December.
    3. Berger, Allen N. & Dai, Qinglei & Ongena, Steven & Smith, David C., 2003. "To what extent will the banking industry be globalized? A study of bank nationality and reach in 20 European nations," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 383-415, March.
    4. Chiappori, Pierre-Andre & Perez-Castrillo, David & Verdier, Thierry, 1995. "Spatial competition in the banking system: Localization, cross subsidies and the regulation of deposit rates," European Economic Review, Elsevier, vol. 39(5), pages 889-918, May.
    5. Kim, Moshe, 1986. "Banking technology and the existence of a consistent output aggregate," Journal of Monetary Economics, Elsevier, vol. 18(2), pages 181-195, September.
    6. Mitchell A. Petersen & Raghuram G. Rajan, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 407-443.
    7. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    8. Berg, Sigbjorn Atle & Kim, Moshe, 1998. "Banks as Multioutput Oligopolies: An Empirical Evaluation of the Retail and Corporate Banking Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(2), pages 135-153, May.
    9. Shaffer, Sherrill, 1993. "A Test of Competition in Canadian Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 49-61, February.
    10. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    11. Grosse, Robert & Goldberg, Lawrence G., 1991. "Foreign bank activity in the United States: An analysis by country of origin," Journal of Banking & Finance, Elsevier, vol. 15(6), pages 1093-1112, December.
    12. Berg, Sigbjorn Atle & Kim, Moshe, 1994. "Oligopolistic Interdependence and the Structure of Production in Banking: An Empirical Evaluation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 309-322, May.
    13. Alli Nathan & Edwin H. Neave, 1989. "Competition and Contestability in Canada's Financial System: Empirical Results," Canadian Journal of Economics, Canadian Economics Association, vol. 22(3), pages 576-594, August.
    14. Salas, Vicente & Saurina, Jesus, 2003. "Deregulation, market power and risk behaviour in Spanish banks," European Economic Review, Elsevier, vol. 47(6), pages 1061-1075, December.
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    Citations

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    Cited by:

    1. Dairo Estrada A. & Sandra V. Rozo V., 2007. "Spatial competition in the Colombian deposit market," Coyuntura Económica, Fedesarrollo, December.
    2. Shusen Qi & Ralph De Haas & Steven Ongena & Stefan Straetmans & Tamas Vadasz, 2017. "Move a Little Closer? Information Sharing and the Spatial Clustering of Bank Branches," Swiss Finance Institute Research Paper Series 17-74, Swiss Finance Institute, revised Jun 2023.
    3. Temesvary, Judit, 2015. "Dynamic branching and interest rate competition of commercial banks: Evidence from Hungary," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 98-110.
    4. Dairo Estrada & Sandra Rozo, 2006. "Multimarket spatial competition in the Colombian deposit market," Borradores de Economia 3264, Banco de la Republica.
    5. Sandra Rozo & Diego Vásquez & Dairo Estrada, 2008. "An Industrial Organization Analysis for the Colombian Banking System," Borradores de Economia 5001, Banco de la Republica.
    6. Stefano Colombo, 2017. "Traditional banks, online banks, and number of branches," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(2), pages 175-197, June.

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