Spillovers from entry: the impact of bank branch network expansion

Joseph Kuehn

RAND Journal of Economics, 2018, vol. 49, issue 4, 964-994

Abstract: I study why local banking markets became dominated by multimarket firms following deregulation in the 1990s. I estimate a model of branch entry that allows for spillovers across markets. The spillovers complicate estimation, and so I develop a revealed preference approach that also deals with unobserved firm and market heterogeneity. I then analyze the impact of multimarket banks and find that they increase local competition, but that they also open more branches than single‐market firms, and subsequently offer lower deposit rates. Ultimately, their welfare impact differs across markets based on the availability of outside alternatives and consumer sensitivity to rates.

Date: 2018
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