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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Market Structure and Competition Among Retail Depository Institutions
Andew Cohen and Michael Mazzeo

Abstract: We assess the competitive impact that single-market banks and thrift institutions have on multi-market banks (and vice-versa) in 1,884 non- MSA markets. We estimate a model of equilibrium market structure which endogenizes entry for three types: multi-market banks, single-market banks, and thrift institutions. Observed market structures and the solution to an entry-type game identify the parameters of a latent (unobserved) profit function. We find significant evidence of product differentiation-- particularly in the case of thrifts. Furthermore, product differentiation appears to depend upon differences in market geography.

Keywords: Market structure, entry, bank, thrift

Full paper (661 KB PDF)

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Last update: February 10, 2004