Keywords: Demand, discrete choice, consumer welfare, product differentiation, market power, banking
Abstract: This paper estimates a structural demand model for commercial bank
deposit services. Following the discrete choice literature, consumer
decisions are based on prices and bank characteristics. The results,
based on the U.S. for 1993-1999, indicate that, with respect to prices,
consumers respond to deposit rates, and to a lesser extent, to account
fees, in choosing a depository institution. Moreover, consumers
respond favorably to the branch staffing and geographic density, as
well as to the bank's age, size, and geographic diversification. In
light of the banks' responses to regulatory changes throughout the
period, most markets experience a slight increase in welfare.
Full paper (422 KB PDF)
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Last update: December 30, 2002