Decentralized Market Power in Credit Markets

Thiago Silva (), Sérgio Souza, Solange Guerra and Benjamin Tabak

MPRA Paper from University Library of Munich, Germany

Abstract: The literature measures a bank's market power using aggregated data at the bank level. However, market power may be exercised in a decentralized way by each bank branch and for specific banking products. This article proposes a novel methodology for estimating a bank's market power at the branch level in each locality and for each banking product. We find significant heterogeneity in banks' market power by locality and product, even within the same bank. Our results suggest that aggregate measures of bank market power may be misleading and distorted. Accurate quantification of market power requires fine-grained measures, which are essential for enhancing financial regulation and competition.

Keywords: market power; Lerner index; competition; credit market; COVID-19 (search for similar items in EconPapers)
JEL-codes: C51 G20 G21 L11 (search for similar items in EconPapers)
Date: 2022-09-27
New Economics Papers: this item is included in nep-ban, nep-com, nep-fdg, nep-ind, nep-pay and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:114766

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