Investment Strategies and Market Structure: An Empirical Analysis of Bank Branching Decisions

Cohen, Andrew; Mazzeo, Michael J.

doi:10.1007/s10693-010-0082-7

Cited by 73 publications

(56 citation statements)

References 31 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Using (10) and (11), the unique symmetric pure-strategy Nash equilibrium is given by (6) and (8). Setting p i = p and q i = q, i = 1; ::; n, and noting that F (z + ) = z + = 1 2n in the symmetric equilibrium, the equilibrium price and quality are given by the following system of equations: 6…”

Section: Modelmentioning

confidence: 99%

Price and quality in spatial competition

Brekke

Siciliani

Straume

2010

Regional Science and Urban Economics

View full text Add to dashboard Cite

We study the relationship between competition and quality within a spatial competition framework where …rms compete in prices and quality. We generalise existing literature on spatial price-quality competition along several dimensions, including utility functions that are non-linear in income and cost functions that are non-separable in output and quality. Our main message is that the scope for a positive relationship between competition and quality is underestimated in the existing literature. If we allow for income e¤ects by assuming that utility is strictly concave in income, we …nd that lower transportation costs always lead to higher quality. The presence of income e¤ects might also reverse a previously reported negative relationship between the number of …rms and equilibrium quality. This reversal result is further strenghtened if there are cost substitutabilities between output and quality. Equilibrium quality provision is always less than socially optimal in the presence of income e¤ects.

show abstract

Section: Modelmentioning

confidence: 99%

Price and quality in spatial competition

Brekke

Siciliani

Straume

2010

Regional Science and Urban Economics

View full text Add to dashboard Cite

show abstract

“…14 This seems like a realistic approximation given the evidence provided in Kiser (2004) and Cohen and Mazzeo (2007). Branch location information on all financial institutions in Canada has been scanned and transferred to electronic files from the "Financial Services Canada" directory produced by Micromedia Proquest.…”

Section: Branch Datamentioning

confidence: 99%

“…The directory provides information on branch locations in all local markets for all of the years in our sample as well as years prior to the introduction of e-banking. With this information we construct measures of branch density to reflect the quality of the offline option since there is convincing evidence that consumers care strongly about the extent of a bank's network of branches (Kiser (2004), Cohen and Mazzeo (2007) and Grzelonska (2005)). …”

mentioning

confidence: 99%

Market Structure and the Diffusion of E-Commerce: Evidence from the Retail Banking Industry

2009

View full text Add to dashboard Cite

This paper studies the role that market structure plays in affecting the diffusion of electronic banking. Electronic banking (and electronic commerce more generally) reduces the cost of performing many types of transactions for firms. The full benefits for firms from adoption, however, only accrue once consumers begin to perform a significant share of their transactions online. Since there are learning costs to adopting the new technology firms may try to encourage consumers to go online by affecting the relative quality of the online and offline options. Their ability to do so is a function of market structure. In more competitive markets, reducing the relative attractiveness of the offline option involves the risk of losing customers (or potential customers) to competitors, whereas, this is less of a concern for a more dominant firm. We develop a model of branch-service quality choice with switching costs meant to characterize the trade-off banks face when rationalizing their network between technology penetration and business stealing. The model is solved numerically and we show that the incentive to lower branch-service quality and drive consumers into electronic banking is greater in more concentrated markets and for more dominant banks. We find support for the predictions of the model using a panel of household survey data on electronic payment usage as well as branch location data, which we use to construct measures of branch quality. JEL classification: D14, D4, G21, L1 Bank classification: Financial institutions; Market structure and pricing RésuméLes auteurs étudient le rôle de la structure de marché dans la diffusion des services bancaires

show abstract

“…Both Dick (2007) and Cohen and Mazzeo (2007b) find that the incumbent banks in markets tend to expand via new branches to aid in deterring new entry when demand grows.…”

mentioning

confidence: 99%

An Examination of Entry and Competitive Performance in Rural Banking Markets

Feinberg

Reynolds

2010

Southern Economic Journal

View full text Add to dashboard Cite

This paper explores the change in the level of competition in rural banking markets since the deregulation that occurred following passage of the Riegle Neal Act of 1994. Using an empirical model that utilizes both the number of banks and the value of deposits in a cross-section of rural markets, we decompose the impact of the entry of new banks into resulting changes in per capita demand and the costs/profits of local banks in both 1994 and 2004. We conclude that the banking market is more competitive today despite the fact that the number of banks may have declined; on average fewer banks are now needed to make rural banking markets competitive than were needed in 1994.

show abstract

Investment Strategies and Market Structure: An Empirical Analysis of Bank Branching Decisions

Abstract: Investments, Competition, Market structure, Banking industry, L11, L13, G21, G28,

Cited by 73 publications

References 31 publications

Price and quality in spatial competition

Price and quality in spatial competition

Market Structure and the Diffusion of E-Commerce: Evidence from the Retail Banking Industry

An Examination of Entry and Competitive Performance in Rural Banking Markets

Contact Info

Product

Resources

About