Joint market power in banking: Evidence from developing countries

Walid Marrouch () and Rima Turk-Ariss
Authors registered in the RePEc Author Service: Rima Turk Ariss

Journal of International Financial Markets, Institutions and Money, 2014, vol. 31, issue C, 253-267

Abstract: We propose an oligopsony-oligopoly model to study bank behavior under uncertainty in developing countries and derive a pricing structure that acknowledges joint market power in both the deposit and loan markets. The model identifies two main components to pricing: rent extraction and input costs. We measure the ability of the banking industry to extract rents from the exercise of joint market power using a sample of 103 developing countries. We find that market power rents are economically significant. Also, the role played by the rent extraction share in loan pricing dominates the share of input costs on average.

Keywords: Market power; Bank pricing; Uncertainty; Developing countries (search for similar items in EconPapers)
JEL-codes: C23 G21 L13 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:31:y:2014:i:c:p:253-267

DOI: 10.1016/j.intfin.2014.03.013

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