Research Details

Abstract

We assess competition among retail depository institutions in 1,884 rural markets. We estimate a model of equilibrium market structure which endogenizes the operating decisions of three types of depository institutions: multimarket banks, single-market banks and thrift institutions. Observed market structures and a game-theoretic specification of entry behavior identify the parameters of an underlying profit functions. We find strong evidence that product differentiation generates additional profits for retail depository institutions. These profits help to maintain smaller banks and thrifts, even as larger banks expand their operations. Consumers have more options, as more institutions can profitably operate as a result of product differentiation.

Type

Article

Author(s)

Andrew Cohen, Michael Mazzeo

Date Published

2007

Citations

Cohen, Andrew, and Michael Mazzeo. 2007. Market Structure and Competition Among Retail Depository Institutions. Review of Economics and Statistics.(1): 60-74.