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Estimating the intensity of price and non-price competition in banking: an application to the Spanish case

Author

Listed:
  • Carbó Valverde Santiago

    (UNIVERSITY OF GRANADA FEDERAL RESERVE BANK OF CHICAGO)

  • Fernández de Guevara Radoselovics Juan

    (University of Valencia; Ivie)

  • Humphrey David

    (FLORIDASTATE UNIVERSITY)

  • Maudos Villarroya Joaquín

    (UNIVERSITY OF VALENCIA THE VALENCIAN INSTITUTE OF ECONOMIC RESEARCH (Ivie))

Abstract

We model bank oligopoly behaviour using price and non-price competition as strategic variables in an expanded conjectural variations framework. Rivals can respond to changes in both loan and deposit market prices as well as (non-price) branch market shares. The model is illustrated using data for Spain which, over 1986-2002, eliminated interest rate and branching restrictions and set off a competitive race to lock in expanded market shares. Banks use both interest rates and branches as strategic variables and both have changed over time. We illustrate the results using a regional vs. a national specification for the relevant markets.

Suggested Citation

  • Carbó Valverde Santiago & Fernández de Guevara Radoselovics Juan & Humphrey David & Maudos Villarroya Joaquín, 2005. "Estimating the intensity of price and non-price competition in banking: an application to the Spanish case," Working Papers 201023, Fundacion BBVA / BBVA Foundation.
    • Handle: RePEc:fbb:wpaper:201023
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    References listed on IDEAS

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    Cited by:

    1. Alin Marius Andrieş & Bogdan Căpraru, 2012. "Competition and efficiency in EU27 banking systems," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 12(1), pages 41-60, July.
    2. Juan Ayuso & Jorge Martínez, 2006. "Assessing banking competition: an application to the Spanish market for (quality-changing) deposits," Working Papers 0623, Banco de España.
    3. Raquel Lago-González & Vicente Salas-Fumás, 2005. "Market power and bank interest rate adjustments," Working Papers 0539, Banco de España.
    4. Juan Fernandez de Guevara & Joaquin Maudos, 2009. "Regional Financial Development and Bank Competition: Effects on Firms' Growth," Regional Studies, Taylor & Francis Journals, vol. 43(2), pages 211-228.
    5. Maudos, Joaquín & Solís, Liliana, 2011. "Deregulation, liberalization and consolidation of the Mexican banking system: Effects on competition," Journal of International Money and Finance, Elsevier, vol. 30(2), pages 337-353, March.
    6. Enrique Benito, 2008. "Size, growth and bank dynamics," Working Papers 0801, Banco de España.
    7. Andrieş, Alin Marius & Căpraru, Bogdan, 2014. "The nexus between competition and efficiency: The European banking industries experience," International Business Review, Elsevier, vol. 23(3), pages 566-579.
    8. Solís, Liliana & Maudos, Joaquín, 2008. "The social costs of bank market power: Evidence from Mexico," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 467-488, September.
    9. MEREUTA, Cezar & CAPRARU, Bogdan, 2012. "Romanian Banking Competition. A New Structural Approach," Working Papers of National Institute for Economic Research 120722, Institutul National de Cercetari Economice (INCE).

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    More about this item

    Keywords

    non-price competition; banking; market shares.;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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