Who Competes with Whom? The Case of Depository Institutions

FEDS Working Paper No. 2005-03

Journal of Industrial Economics, Vol. 55, No. 1, pp. 141-167, 2007

40 Pages Posted: 1 Feb 2005

Date Written: December 30, 2004


Little empirical work exists on the substitutability of depository institutions. In particular, the willingness of consumers to substitute banks for thrifts and to switch between multimarket and single-market institutions (i.e., institutions with large vs. small branch networks) has been of strong interest to policymakers. We estimate a structural model of consumer choice of depository institutions using a panel data set that includes most depository institutions and market areas in the United States over the period 1990-2001. Using a flexible framework, we uncover utility parameters that affect a consumer's choice of institution and measure the degree of market segmentation for two institution subgroups. We use our estimates to calculate elasticities and perform policy experiments that measure the substitutability of firms within and across groupings. We find both dimensions - thrifts and banks, and single- and multimarket institutions - to be important market segments to consumer choice and, ultimately, to competition in both urban and rural markets.

Keywords: Depository institutions, product differentiation, discrete choice, demand estimation, antitrust, SSNIP

Suggested Citation

Adams, Robert M. and Brevoort, Kenneth and Kiser, Elizabeth K., Who Competes with Whom? The Case of Depository Institutions (December 30, 2004). FEDS Working Paper No. 2005-03. Available at SSRN: https://ssrn.com/abstract=658222 or http://dx.doi.org/10.2139/ssrn.658222

Robert M. Adams

Federal Reserve Board ( email )

20th and C Streets, NW
Washington, DC 20551
202-452-2653 (Phone)

Kenneth Brevoort


No Address Available

Elizabeth K. Kiser (Contact Author)

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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