The effect of multimarket contacts on competition in Mexican banking

María del Carmen Dircio Palacios Macedo (), Paula Cruz-García (), Fausto Hernández-Trillo () and Emili Tortosa-Ausina ()
Additional contact information
María del Carmen Dircio Palacios Macedo: Department of Economics, Universitat Jaume I, Castellón, Spain
Paula Cruz-García: Department of Economic Analysis, Universitat de Valencia, Spain
Fausto Hernández-Trillo: Center for Research and Teaching in Economics (CIDE), Mexico
Emili Tortosa-Ausina: IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain

No 2026/07, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: Traditional competition analysis typically relates the exercise of market power in an industry to structural characteristics of a market, such as concentration, barriers to entry, and factor and demand conditions. However, this analysis is incomplete if we do not consider the effects of contact among firms across markets. The objective of this paper is to empirically examine the effect of multimarket contact and of intensity of multimarket contact on bank competition in Mexico for the period of 2011 to 2023, using information at the bank and municipal market level. The Mexican case provides a valuable context for analyzing the relationship between market power and multimarket contacts, given the several regulatory reforms that have occurred in recent years and that have eliminated entry barriers to new competitors, as well as the trend toward consolidation of the banking sector. The main results suggest a positive relationship between market power and the quantity and intensity of multimarket contacts. In this context, the hypothesis of "mutual forbearance" in the Mexican banking sector could not be rejected. These findings have relevant implications for competition policy, suggesting that regulators should account multimarket contact structures when assessing competitive dynamics in the banking sector.

Keywords: bank competition; multimarket contact; mutual forbearance; Mexico (search for similar items in EconPapers)
JEL-codes: C33 G21 L40 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.doctreballeco.uji.es/wpficheros/Dircio_et_al_07_2026.pdf (application/pdf)

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:jau:wpaper:2026/07

Access Statistics for this paper

More papers in Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain) Contact information at EDIRC.
Bibliographic data for series maintained by María Aurora Garcia Gallego ().