Demand, Competition and Welfare Analysis in the Turkish Banking Sector

52 Pages Posted: 16 Sep 2011

See all articles by Levent Yildiran

Levent Yildiran

Bogazici University - Department of Economics

Guzin Gulsun Akin

Bogazici University - The Faculty of Economics and Administrative Sciences

Ahmet Faruk Aysan

Bogazici University

Sebnem İleri

affiliation not provided to SSRN

Date Written: September 16, 2011

Abstract

This paper investigates consumer demand, competition and welfare in the Turkish deposit and credit markets in 2002-2009 period by using banks’market shares in these markets. A discrete choice structural demand model developed by Berry (1994) is employed in the estimations. As market shares reflect consumers’ final choices, the methodology starts with constructing the utility function of consumers who purchase deposit (loan) services from a bank. This method allows us to elaborate on demand, competition and welfare in the same analysis. In the model, a market share equation is derived from the utility function and elasticities which allow to comment on competiton are calculated. Lastly, the paper concludes with a welfare analysis based on consumers’ last choices. Results of the study show that price elasticities of credit customers are much higher than those of depositors. It may yield more effective results to make price competition in credit market, whereas banks may increase their market share in deposit side by differentiating their products for depositors. There is welfare loss for depositors within 2002-2009 period, but credit customers experience an increase in their welfare in the same period.

Keywords: Banking, Demand, Competition, Welfare, discrete choice structural demand model, deposit markets, credit markets

JEL Classification: G21, G28, O16

Suggested Citation

Yildiran, Levent and Akin, Guzin Gulsun and Aysan, Ahmet Faruk and İleri, Sebnem, Demand, Competition and Welfare Analysis in the Turkish Banking Sector (September 16, 2011). Available at SSRN: https://ssrn.com/abstract=1928631 or http://dx.doi.org/10.2139/ssrn.1928631

Levent Yildiran (Contact Author)

Bogazici University - Department of Economics ( email )

Natuk Birkan Building
Bebek
Istanbul, 34342
Turkey

Guzin Gulsun Akin

Bogazici University - The Faculty of Economics and Administrative Sciences ( email )

34342 Bebek - Istanbul
Turkey

Ahmet Faruk Aysan

Bogazici University ( email )

Bebek, İstanbul 34342
Turkey

Sebnem İleri

affiliation not provided to SSRN ( email )

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