Cross-Selling, Switching Costs and Imperfect Competition in British Banks

38 Pages Posted: 28 Aug 2011

See all articles by Tianshu Zhao

Tianshu Zhao

University of Stirling - Department of Economics

Kent Matthews

Cardiff University Business School

Victor Murinde

University of London - School of Oriental and African Studies (SOAS)

Date Written: August 26, 2011

Abstract

We seek to evaluate the competitiveness of British banking in the presence of cross-selling and switching costs during 1993-2008. We estimate a model of banking behaviour that encompasses switching costs as well as cross-selling of loans and off-balance sheet transactions. The evidence from panel estimation of the model lends support to our theoretical priors on the cross-selling behaviour of British banks, which helps explain the rapid growth of non-interest income during this period. Also, it is found that the banking consumer faced high switching costs in the loan market in the latter part of the sample period, which indicates a worsening of competitiveness.

Keywords: Competition, Bank, Cross-Selling, Switching Costs

JEL Classification: G21, L13

Suggested Citation

Zhao, Tianshu and Matthews, Kent and Murinde, Victor, Cross-Selling, Switching Costs and Imperfect Competition in British Banks (August 26, 2011). Available at SSRN: https://ssrn.com/abstract=1917713 or http://dx.doi.org/10.2139/ssrn.1917713

Tianshu Zhao (Contact Author)

University of Stirling - Department of Economics ( email )

Stirling, FK9 4LA
United Kingdom

Kent Matthews

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5855 (Phone)
+44 29 2087 4419 (Fax)

Victor Murinde

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom
02078984057 (Phone)

HOME PAGE: http://https://www.soas.ac.uk/staff/staff120377.php

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