Relative Market Share, Leadership and Competition in Concentrated Banking Markets

ICER Working Paper Series No. 14-2005

20 Pages Posted: 28 Jul 2005

See all articles by Arie Melnik

Arie Melnik

University of Haifa - Department of Economics

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Rune Stenbacka

Hanken School of Economics

Date Written: June 2005

Abstract

For many years IO economists devoted attention to the size distributions' of firms in a given industry. Most studies showed that the size distribution of firms in oligopolistic markets is highly skewed. There are many small firms and a few large firms. There is also a consensus that relative market shares are important and that large firms are, in general, more profitable and durable than small firms. Relative size is also important as a determinant of the structure of the industry. The concept is also central in strategic analysis of business firms and in the formulation of government (regulatory) policy.

In this paper we propose to use an empirical measure of market leadership. The measure relies on the assumption that the degree of competition critically depends on how dominant the leading firm is in a given industry. The measure also takes into account the number of "significant" competitors in the market and how close they are to the leading firm in terms of size. The measure is simple to use and easy to interpret. It also yields a critical value that facilitates comparisons between different markets.

Suggested Citation

Melnik, Arie L. and Shy, Oz and Stenbacka, Rune, Relative Market Share, Leadership and Competition in Concentrated Banking Markets (June 2005). ICER Working Paper Series No. 14-2005. Available at SSRN: https://ssrn.com/abstract=761747 or http://dx.doi.org/10.2139/ssrn.761747

Arie L. Melnik (Contact Author)

University of Haifa - Department of Economics ( email )

Haifa 31905
Israel

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

HOME PAGE: http://https://www.frbatlanta.org/research/economists/shy-oz.aspx

Rune Stenbacka

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland
+35 89 4313 3433 (Phone)
+35 89 4313 3382 (Fax)

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