IDEAS home Printed from https://ideas.repec.org/a/wly/revfec/v12y2003i1p49-63.html
   My bibliography  Save this article

Market structure, consumer banking, and optimal level of service quality

Author

Listed:
  • William E. Jackson
  • Purushottaman Nandakumar
  • Aleda V. Roth

Abstract

In this article, we use a very simple game theoretic model to investigate the influence of differing market structures, or competitive conditions, on a bank's decision to increase the level of quality of the retail, or consumer, services that it markets. The results from our model suggest that the optional level of a bank's service quality depends critically on the competitive structure of the market in which the bank operates, the degree of demand interaction between banks, and the ease of imitation of competitors' service quality innovations. We find that banks in low demand interaction markets will adopt different strategies, inducing each bank to develop its own “unique” brand of quality. It is not necessarily the case that the leading banks will lead in quality improvements. This may partially explain why some of the largest banks do not have the highest levels of consumer service quality.

Suggested Citation

  • William E. Jackson & Purushottaman Nandakumar & Aleda V. Roth, 2003. "Market structure, consumer banking, and optimal level of service quality," Review of Financial Economics, John Wiley & Sons, vol. 12(1), pages 49-63.
    • Handle: RePEc:wly:revfec:v:12:y:2003:i:1:p:49-63
    DOI: 10.1016/S1058-3300(03)00006-5
    as

    Download full text from publisher

    File URL: https://doi.org/10.1016/S1058-3300(03)00006-5
    Download Restriction: no
    File URL: https://libkey.io/10.1016/S1058-3300(03)00006-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Reinganum, Jennifer F, 1982. "A Dynamic Game of R and D: Patent Protection and Competitive Behavior," Econometrica, Econometric Society, vol. 50(3), pages 671-688, May.
    2. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 395-410.
    3. Reinganum, Jennifer F, 1984. "Practical Implications of Game Theoretic Models of R&D," American Economic Review, American Economic Association, vol. 74(2), pages 61-66, May.
    4. Morton I. Kamien & Nancy L. Schwartz, 1976. "On the Degree of Rivalry for Maximum Innovative Activity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(2), pages 245-260.
    5. DeBrock, Lawrence M, 1985. "Market Structure, Innovation, and Optimal Patent Life," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 223-244, April.
    6. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
    7. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    8. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    9. Kamien, Morton I & Schwartz, Nancy L, 1972. "Timing of Innovations Under Rivalry," Econometrica, Econometric Society, vol. 40(1), pages 43-60, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jackson, William III & Nandakumar, Purushottaman & Roth, Aleda V., 2003. "Market structure, consumer banking, and optimal level of service quality," Review of Financial Economics, Elsevier, vol. 12(1), pages 49-63.
    2. Nelson, Kelly P. & Parton, Lee C. & Brown, Zachary S., 2022. "Biofuels policy and innovation impacts: Evidence from biofuels and agricultural patent indicators," Energy Policy, Elsevier, vol. 162(C).
    3. Flavio DelbonoBy & Luca Lambertini, 2022. "Innovation and product market concentration: Schumpeter, arrow, and the inverted U-shape curve [Lessons from schumpeterian growth theory]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 297-311.
    4. Subhasish M. Chowdhury, 2017. "The All‐Pay Auction with Nonmonotonic Payoff," Southern Economic Journal, John Wiley & Sons, vol. 84(2), pages 375-390, October.
    5. Mehrez, Abraham & Justman, Moshe, 2001. "On the efficiency of the parallel path R&D approach: a stochastic game analysis," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 57(1), pages 19-28.
    6. Richard A. Jensen, 1980. "A Duopoly Model of the Adoption of an Innovation of Uncertainty Profitability," Discussion Papers 434, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    7. Michael Peneder & Martin Woerter, 2014. "Competition, R&D and innovation: testing the inverted-U in a simultaneous system," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 653-687, July.
    8. Rosenkranz, Stephanie, 1995. "Innovation and cooperation under vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 1-22, March.
    9. Ezra Einy & Ori Haimanko & David Lagziel, 2022. "Strong robustness to incomplete information and the uniqueness of a correlated equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 91-119, February.
    10. Raymond De Bondt & Jan Vandekerckhove, 2012. "Reflections on the Relation Between Competition and Innovation," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 7-19, March.
    11. Ewerhart, Christian, 2017. "Contests with small noise and the robustness of the all-pay auction," Games and Economic Behavior, Elsevier, vol. 105(C), pages 195-211.
    12. Artés, Joaquín, 2009. "Long-run versus short-run decisions: R&D and market structure in Spanish firms," Research Policy, Elsevier, vol. 38(1), pages 120-132, February.
    13. Grishagin, V. A. & Sergeyev, Ya. D. & Silipo, D. B., 2001. "Firms' R&D decisions under incomplete information," European Journal of Operational Research, Elsevier, vol. 129(2), pages 414-433, March.
    14. De Bondt, Raymond, 1997. "Spillovers and innovative activities," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 1-28, February.
    15. Peralta, Susana & Wauthy, Xavier & van Ypersele, Tanguy, 2006. "Should countries control international profit shifting?," Journal of International Economics, Elsevier, vol. 68(1), pages 24-37, January.
    16. Bonatti, Alessandro & Hörner, Johannes, 2017. "Learning to disagree in a game of experimentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 234-269.
    17. Dionne, G. & Doherty, N., 1991. "Adverse Selection In Insurance Markets: A Selective Survey," Cahiers de recherche 9105, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    18. Abderrahmane Ziad, 2003. "Nash Equilibria in Pure Strategies," Bulletin of Economic Research, Wiley Blackwell, vol. 55(3), pages 311-317, July.
    19. Allison, Blake A. & Bagh, Adib & Lepore, Jason J., 2018. "Sufficient conditions for weak reciprocal upper semi-continuity in mixed extensions of games," Journal of Mathematical Economics, Elsevier, vol. 74(C), pages 99-107.
    20. Fleckinger, Pierre & Lafay, Thierry, 2010. "Product flexibility and price competition in Hotelling's duopoly," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 61-68, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:revfec:v:12:y:2003:i:1:p:49-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1873-5924 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.