Spatial Competition and Market Power in Banking

Timothy Richards, Ram N. Acharya and Albert Kagan

No 6566, 2007 1st Forum, February 15-17, 2007, Innsbruck, Austria from International European Forum on System Dynamics and Innovation in Food Networks

Abstract: Banks in non-metropolitan areas compete in a spatially-differentiated environment. Particularly with the advent of electronic banking services, however, there is some question as to how much market power is conferred by spatial separation from rivals. This paper estimates a structural model of the supply and demand of banking services in which pricing power is allowed to depend explicitly on the distance between rival banks. A spatial autoregressive econometric model shows that approximately 38.0% of economic surplus earned by firms in non-metropolitan banking in the upper midwest is due to spatial market power.

Keywords: Community/Rural/Urban Development; Financial Economics (search for similar items in EconPapers)
Pages: 29
Date: 2007
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Journal Article: Spatial competition and market power in banking (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iefi07:6566

DOI: 10.22004/ag.econ.6566

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