The Price-Concentration Relationship in Banking

Allen Berger () and Timothy Hannan

The Review of Economics and Statistics, 1989, vol. 71, issue 2, 291-99

Abstract: The commonly observed positive correlation between market concentration and profitability may be explained by noncompetitive pricing behavior, as argued by the structure-performance hypothesis, or by the greater efficiency of firms with dominant market shares, as argued by the efficient-structure hypothesis. By examining the price-concentration relationship instead of the profit-concentration relationship, this paper tests the structure-performance hypothesis in a manner that excludes the efficient-structure hypothesis as an alternative explanation of the results. The results strongly support the structure-performance hypothesis and are robust with respect to model specification, measurement of concentration, and econometric technique. Copyright 1989 by MIT Press.

Date: 1989
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Working Paper: The price-concentration relationship in banking (1988)
Working Paper: The price-concentration relationship in banking (1987)
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