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Whom to Merge with? A Tale of the Spanish Banking Deregulation Process

Author

Listed:
  • Ana Lozano-Vivas

    (Department of Economic Theory, Universidad de Málaga)

  • Miguel A. Meléndez-Jímenez

    (Department of Economic Theory, Universidad de Málaga)

  • Antonio J. Morales

    (Department of Economic Theory, Universidad de Málaga)

Abstract

We put forward a simple spatial competition model to study banks’ strategic responses to the Spanish asymmetric geographic deregulation. We find that once geographic deregulation process finishes, inter-regional mergers between the savings banks are optimal. We claim that the public good nature of the merging activities together with the incentives provided by the deregulation process are the driving factors behind the equilibrium merger of the savings banks. It seems that the economic crisis will finally force regional politicians to allow inter-regional caja mergers, letting the consequences of the removal of geographic barriers in the 80’s come to a fruition with a delay of thirty years.

Suggested Citation

  • Ana Lozano-Vivas & Miguel A. Meléndez-Jímenez & Antonio J. Morales, 2010. "Whom to Merge with? A Tale of the Spanish Banking Deregulation Process," Working Papers 2010-03, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  • Handle: RePEc:mal:wpaper:2010-3
    as

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    References listed on IDEAS

    as
    1. Economides, Nicholas & Hubbard, R Glenn & Palia, Darius, 1996. "The Political Economy of Branching Restrictions and Deposit Insurance: A Model of Monopolistic Competition among Small and Large Banks," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 667-704, October.
    2. Larry D. Qiu & Wen Zhou, 2007. "Merger waves: a model of endogenous mergers," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 214-226, March.
    3. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    4. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    5. Caminal, Ramon & Gual, Jordi & Vives, Xavier, 1989. "Competition in Spanish Banking," CEPR Discussion Papers 314, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Banking Competition; Deregulation; Mergers;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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