The multimarket contacts theory; an application to Italian banks

Riccardo De Bonis and Annalisa Ferrando

No 387, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The multimarket contact hypothesis holds that more contacts between firms competing in the same markets may induce more collusion. This paper tests the hypothesis for the Italian banking market, analysing the behaviour of the largest Italian banks from 1990 to 1996. Market rivalry is gauged by changes in loan market shares and interest rates in each Italian province. Different measures of multimarket contacts are built. We estimate the effects of increasing multimarket contacts, concentration indicators, banks� costs and loan growth on variations in market shares and interest rates. No support is found for the multimarket contact hypothesis. Geographical overlap in banking is positively correlated with changes in market shares, confirming the thesis of an overall increase in competition within the Italian banking system. Greater multimarket links also seem to correspond to lower lending rates.

Keywords: banks; antitrust policy; multimarket contacts; panel data (search for similar items in EconPapers)
JEL-codes: C33 G21 L40 (search for similar items in EconPapers)
Date: 2000-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: The Multimarket Contacts Theory: An Application to Italian Banks (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_387_00

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