Theoretical Framework Of Competition As Applied To Banking Industry

K.V. Murthy () and Ashis Taru Deb

MPRA Paper from University Library of Munich, Germany

Abstract: Concepts evolve through time and over time they assume different meanings. The concept of competition is no exception. This paper discusses the evolution of the concept of competition in general with a view to derive a theoretical framework for analyzing competition in banking industry. Starting from the classical notions of competition it proceeds to some of the latest approaches (Northcott (2004), Neuberger (1998), Toolsema (2003), Bolt and Tieman (2001)). The ordinary Structure-Conduct-Performance approach does not involve any analysis of market dynamics. Our approach introduces various aspects of industry dynamics and growth. It provides a methodology to arrive at the market form in banking industry through an analysis of all the aspects of basic conditions, structure, conduct and performance. It is argued that sustained growth and dynamics of the industry is not price led. Growth arises out of changing basic conditions and dynamics arises out of sharing the new market created by basic conditions. Hence the prime mover of competition is rivalry among firms to control market share and to internalize externalities rather than adjustments brought about by the price mechanism.

Keywords: Structure-Conduct-Performance; Competition theory; Banking competition; Basic Conditions; Entry facilitator (search for similar items in EconPapers)
JEL-codes: B19 B29 D21 D40 D41 D49 E58 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-ban, nep-com, nep-cse and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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