Market structure and competition among retail depository institutions

Andrew M. Cohen*, Michael J. Mazzeo

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

46 Scopus citations

Abstract

We assess competition among retail depository institutions in 1,884 rural markets. We estimate an equilibrium market structure model that 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 function. 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.

Original languageEnglish (US)
Pages (from-to)60-74
Number of pages15
JournalReview of Economics and Statistics
Volume89
Issue number1
DOIs
StatePublished - Feb 2007

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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