A frontier measure of U.S. banking competition

Wilko Bolt and David Humphrey

European Journal of Operational Research, 2015, vol. 246, issue 2, 450-461

Abstract: The three main measures of competition (HHI, Lerner index, and H-statistic) are uncorrelated for U.S. banks. We investigate why this occurs, propose a frontier measure of competition, and apply it to five major bank service lines. Fee-based banking services comprise 35 percent of bank revenues so assessing competition by service line is preferred to using a single measure for traditional activities extended to the entire bank. As the Lerner index and the H-statistic together explain only 1 percent of HHI variation and the HHI is similarly unrelated to the frontier method developed here, current merger/acquisition guidelines should be adjusted as banking concentration seems unrelated to likely more accurate competition measures.

Keywords: (D) Productivity and competitiveness; Competition; Banks (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221715003896
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:246:y:2015:i:2:p:450-461

DOI: 10.1016/j.ejor.2015.05.017

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().