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Estimating Market Power in the South African Banking Sector

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  • Charles Okeahalam

Abstract

Indicators of market power can be ambiguous because cost economies associated with scale and not market imperfections may influence results. This article illustrates that without direct measures of concentration, estimates of costs, scale economies and profitability can be used to identify market power in banking. Secondly, via this method, econometric estimates provide meaningful evidence of market power in the South African banking sector over the study sample period (1979-1998). A reasonable conclusion is that while industrial structure is important, careful consideration needs to be given to cost economies and profitability when assessing market power. In addition, there is a need to consider appropriate policy to reduce market power in banking in South Africa.

Suggested Citation

  • Charles Okeahalam, 2007. "Estimating Market Power in the South African Banking Sector," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(5), pages 669-685.
    • Handle: RePEc:taf:irapec:v:21:y:2007:i:5:p:669-685
    DOI: 10.1080/02692170701474702
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    References listed on IDEAS

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    1. Perloff,Jeffrey M. & Karp,Larry S. & Golan,Amos, 2007. "Estimating Market Power and Strategies," Cambridge Books, Cambridge University Press, number 9780521011143, January.
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    1. Charles Okeahalam, 2007. "Economics of access in a developing country: an analysis of firm‐conduct in financial services," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 34(12), pages 923-942, October.
    2. Simpasa, Anthony, 2010. "Characterising market power and its determinants in the Zambian banking indudstry," MPRA Paper 27232, University Library of Munich, Germany.

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    Keywords

    Costs; scale; banks; South Africa;
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