Bank-Level Estimates of Market Power

Sophocles N. Brissimis () and Manthos D. Delis ()

No 93, Working Papers from Bank of Greece

Abstract: The aim of this study is to provide an empirical methodology for the estimation of market power of individual banks. The new method employs the well-known model of Panzar and Rosse (1987) and proposes its estimation using the local regression technique. Thus, a number of restrictive assumptions regarding the properties of the production function of banks are relaxed, while the method proves successful in providing reasonable estimates of bank-level market power when applied to a large panel of banks of transition countries. The empirical results suggest that many banks in the sample deviate significantly from competitive practices and that market power varies substantially across banks in each country. Country averages of the bank-level results exhibit a very close relationship with standard, industry-level Panzar-Rosse estimates.

Keywords: Bank output; Market power; bank-level; local regression (search for similar items in EconPapers)
JEL-codes: G21 L11 C14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-com, nep-eff and nep-ind
Date: 2009-01
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Persistent link: http://EconPapers.repec.org/RePEc:bog:wpaper:93

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