There is growing evidence showing that large and small banks differ in how they
service small businesses and consumers. Large, multimarket banks (LMBs) have more
standardized operations and set prices that are uniform across local markets while
small banks have greater autonomy to price according to local market conditions.
LMBs also differ by having better access to wholesale sources of funding. This
paper presents a model of spatial competition where small, single-market banks
compete with LMBs that operate in multiple markets. It shows that a greater resence
of LMBs in relatively concentrated markets tends to promote competition for non-
deposit services. Moreover, greater multi-market contact among LMBs leads to a
further reduction in market prices, a result that is counter to the predictions of
linked-oligopoly theory. If LMBs have significant funding advantages relative to
smaller banks, then entry by LMBs promotes competition in retail lending markets
but harms competition in retail deposit markets.
The model provides a logical explanation for recent empirical evidence documenting
the competitive effects of LMBs.
학술대회/행사
학술대회안내
[2003년 제 2차] Why Does Institution Size Matter for Banking Market
작성자 : 관리자
조회수 : 933
게시일 :
2003-07-12