Market Power in Outputs and Inputs: An Empirical Application To Banking

29 Pages Posted: 14 Feb 2003

See all articles by Robert M. Adams

Robert M. Adams

Board of Governors of the Federal Reserve System

Lars-Hendrik Röller

ESMT European School of Management and Technology; Centre for Economic Policy Research (CEPR); WZB Berlin Social Science Center - Competitiveness and Industrial Change

Robin C. Sickles

Rice University - Department of Economics

Date Written: October 23, 2002

Abstract

This paper provides evidence on the empirical separability of input and output market imperfections. We specify a model of banking competition and simultaneously estimate bank conduct in output (loan) and input (deposit) markets. Our results suggest that firms display some degree of non-competitive behavior in both the loan and the deposit markets. Moreover, we find that the input side and the output side are empirically separable, that is the measurement of market power on one side of the market is not affected by assuming that the other side of the market is perfectly competitive. Our results suggest that empirical studies of market power that concentrate on either the input side or the output side are not subject to significant misspecification error.

Keywords: Measuring market power, banking

JEL Classification: G2, L1, C3

Suggested Citation

Adams, Robert M. and Röller, Lars-Hendrik and Sickles, Robin C., Market Power in Outputs and Inputs: An Empirical Application To Banking (October 23, 2002). Available at SSRN: https://ssrn.com/abstract=355100 or http://dx.doi.org/10.2139/ssrn.355100

Robert M. Adams (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
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202-452-2653 (Phone)

Lars-Hendrik Röller

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin, 10178
Germany

HOME PAGE: http://www.esmt.org/eng/faculty-research/lars-hendrik-roeller/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

WZB Berlin Social Science Center - Competitiveness and Industrial Change ( email )

Reichpietschufer 50
10785 Berlin
Germany
+49 30 2549 1440 (Phone)
+49 30 2549 1442 (Fax)

Robin C. Sickles

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States

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