Measuring Market Power in the Spanish Mutual Funds Industry for Retail Investors
31 Pages Posted: 29 Jul 2014 Last revised: 31 Aug 2015
Date Written: August 31, 2015
Abstract
The mutual fund industry is characterized by high concentration and a high number of offered funds. During last year, the Spanish management companies have reported for the whole market a margin, measured by the Lerner index, of between 25 and 28 per cent. By using an econometric structural model of competition among management companies, it is shown how mutual fund elasticities are low in the retail market. This result casts doubts about the effectiveness of the fee-caps at work. Moreover, a simple model of monopolistic competition pricing is assumed, what it provides estimations of their actual margins above 40 per cent in that market. In order to address this lack of competition, some regulatory measures are proposed.
Keywords: Competition, Market Power, Differentiation
JEL Classification: G23, L11
Suggested Citation: Suggested Citation