Competition Impact of Market Structure: The Case of Banking Services Markets in Two Russian Regions

13 Pages Posted: 31 Aug 2011 Last revised: 29 Dec 2012

See all articles by Anna Anisimova

Anna Anisimova

National Research University Higher School of Economics

Philip Muradyan

National Research University Higher School of Economics

Andrei Vernikov

Russian Academy of Sciences (RAS) - Institute of Economics

Date Written: May 1, 2012

Abstract

This empirical paper adds to competition and industrial organization literature by exploring the interplay between industry structure and competitiveness on local, rather than nation-wide, markets. We use micro-level statistical data for banks in two Russian regions (Bashkortostan and Tatarstan) to estimate Herfindahl-Hirschman index, Lerner index, and Panzar-Rosse model. We estimate Panzar-Rosse model in two ways: via the widely used price-equation that accounts for scale effects and then via a revenue-equation that disregards scale effects as suggested by Bikker et al. (2009). We find both regional markets to be ruled by monopolistic competition, although estimation by revenue-equation does not reject monopoly hypothesis for Tatarstan. Existence of sizeable locally-owned and operated institutions does not necessarily lead to higher competitiveness of the given regional market, and the results from non-structural methods of estimation suggest that bank competition in Bashkortostan is stronger than in Tatarstan. Going further away from aggregated analysis we compute Lerner indices in two product segments of Tatarstan – retail and corporate loans – and find that retail segment is significantly more competitive. Local banks exert more market power in corporate loans, while federal branches – in retail loans.

Keywords: banks, competition, concentration, Russia, Bashkortostan, Tatarstan, market power, Lerner index

JEL Classification: G21, L11, L13

Suggested Citation

Anisimova, Anna and Muradyan, Philip and Vernikov, Andrei V., Competition Impact of Market Structure: The Case of Banking Services Markets in Two Russian Regions (May 1, 2012). Available at SSRN: https://ssrn.com/abstract=1919817 or http://dx.doi.org/10.2139/ssrn.1919817

Anna Anisimova

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Philip Muradyan

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Andrei V. Vernikov (Contact Author)

Russian Academy of Sciences (RAS) - Institute of Economics ( email )

32, Nakhimovsky Prospekt
Moscow, 117218
Russia

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