Competition Conditions and Market Power in the Mexican Commercial Banking Market. A Microeconomic Theoretical Approach

Jacques Lartigue-Mendoza (), Kenneth Azael Ayala-Navarro () and Gustavo Enrique Sauri-Alpuche ()

Revista Finanzas y Politica Economica, 2020, vol. 12, issue 2, 367-402

Abstract: This study assesses, from a microeconomic theoretical perspective, competition conditions and market power in the Mexican commercial banking market. Our econometric estimations, using time series, indicate a low price elasticity of demand for bank credit, which, in combination with high market shares and according to the Lerner index, indicates that major banks have elevated market power; the proffered values of the Lerner index range between (0.11) and (0.68) for the seven leading banks, (0.00) for small banks, and (0.34) for the weighted average of the entire market. On the other hand, the estimated competition indicators confirm the exercise of market power and the lack of a competitive market, during at least the last decade, resulting in a large fraction of unserved economic agents by commercial banks.

Keywords: Mexican commercial banking market; competition conditions; market power. (search for similar items in EconPapers)
JEL-codes: D43 G21 L40 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:col:000443:019645

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