The Impact of Mergers on the Degree of Competition in the Banking Industry

32 Pages Posted: 18 Jan 2010

See all articles by Vittoria Cerasi

Vittoria Cerasi

Bicocca University - Department of Economics, Management & Statistics (DEMS)

Barbara Chizzolini

Bocconi University - Department of Economics

Marc Ivaldi

Toulouse School of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2010

Abstract

This paper analyses the relation between competition and concentration in the banking sector. The empirical answer is given by testing a monopolistic competition model of bank branching behaviour on individual bank data at county level (départements and provinces) in France and Italy. We propose a measure of the degree of competiveness in each local market that is function also of market structure indicators. We then use the econometric model to evaluate the impact of horizontal mergers among incumbent banks on competition and discuss when, depending on the pre-merger structure of the market and geographic distribution of branches, the merger is anti-competitive. The paper has implications for competition policy as it suggests an applied tool to evaluate the potential anti-competitive impact of mergers.

Keywords: Banking industry, Competition and market structure, Merger policy

JEL Classification: G21, L13, L59

Suggested Citation

Cerasi, Vittoria and Chizzolini, Barbara and Ivaldi, Marc, The Impact of Mergers on the Degree of Competition in the Banking Industry (January 2010). CEPR Discussion Paper No. DP7618. Available at SSRN: https://ssrn.com/abstract=1536337

Vittoria Cerasi (Contact Author)

Bicocca University - Department of Economics, Management & Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy
+39-02-64485821 (Phone)
+39-02-64485878 (Fax)

Barbara Chizzolini

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Marc Ivaldi

Toulouse School of Economics ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France
+33 5 61 12 8592 (Phone)
+33 5 61 12 8637 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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