Keywords: Bank, pricing, multimarket
Abstract: Regulators and research economists typically view retail banking markets as
locally limited, spanning an area that can often be approximated by a metropolitan
area or a rural county. Banks are assumed to set retail prices based on the conditions
of supply and demand prevailing within these local market areas. However, recent studies
have found evidence that large, multimarket banking organizations tend to offer uniform
interest rates for retail deposit accounts of a particular type throughout the area that
they serve, at least within a given state. This uniform pricing phenomenon raises questions
about the continued relevance of the concept of local banking markets for both research
and antitrust purposes. We address this issue by developing and empirically testing a model
to determine the effects of the presence of multimarket banks in a local geographic market
on the deposit interest rates offered by single-market banks serving
that same local market.
Full paper (81 KB PDF)
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