The distinction between retail and corporate banking markets is of much importance in real life banking organizations. The two markets differ with respect to concentration, the importance of informational asymmetries, and the extent of customer mobility. Within a standard conjectural variation model estimated on cost-efficient banks as well as on the full sample of banks, we empirically characterize the strategic behavior in each of these markets, and also focus on cross-market interactions to see whether initial moves in one market affect the equilibrium in the other market. We compare our findings to the predictions that would follow from merely considering concentration ratios, such as the Herfindahl index.
ASJC Scopus subject areas
- Economics and Econometrics