Deregulation, Competition and Consumer Welfare in Banking Market: Evidence from Hong Kong
Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management
December 1, 2007
HKIMR Working Paper No. 24/2007
This paper examines competition among commercial banks following deregulation in a small open economy. I jointly estimate a system of differentiated product demand and pricing equations, and use conduct parameters to identify market structure. The empirical results show that the banking sector is characterized by the Nash-Bertrand equilibrium in which bank size is important for product differentiation. Following deregulation, bank competition intensifies and cost efficiency improves.
Number of Pages in PDF File: 29
Keywords: Banking, Conduct Parameters, Consumer Welfare, Demand, Deregulation, Hong Kong, Product Differentiation
JEL Classification: G21, L13working papers series
Date posted: February 12, 2008
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