Abstract
The first part of this paper provides a systematic discussion of the structural
problems of competition on financial markets as observed from the demand and
from the supply side, using a diagnostic framework. Potential impediments to
competition are concentration, entry barriers, lack of transparency, product
complexity, switching and search costs, financial illiteracy, lack of consumer power and weak intermediaries. In response to such financial market failures, we suggest a number of possible policy reactions. The second part of the paper investigates ways to measure competition and provides empirical figures on banking competition in 101 separate countries and assesses the market structure as monopolistic (or a perfect cartel), perfectly competitive or monopolistic competitive. Also, banking competition is explained, using explanatory variables of market structure, contestability, inter-industry competition, and institutional and macro economic conditions. This analysis provides possible instruments for reform in order to help
promote competition. Next, the impact of banking consolidation is examined. Finally, developments in competition are observed over time, generally pointing to a downward trend.
problems of competition on financial markets as observed from the demand and
from the supply side, using a diagnostic framework. Potential impediments to
competition are concentration, entry barriers, lack of transparency, product
complexity, switching and search costs, financial illiteracy, lack of consumer power and weak intermediaries. In response to such financial market failures, we suggest a number of possible policy reactions. The second part of the paper investigates ways to measure competition and provides empirical figures on banking competition in 101 separate countries and assesses the market structure as monopolistic (or a perfect cartel), perfectly competitive or monopolistic competitive. Also, banking competition is explained, using explanatory variables of market structure, contestability, inter-industry competition, and institutional and macro economic conditions. This analysis provides possible instruments for reform in order to help
promote competition. Next, the impact of banking consolidation is examined. Finally, developments in competition are observed over time, generally pointing to a downward trend.
| Original language | English |
|---|---|
| Place of Publication | Utrecht |
| Publisher | UU USE Tjalling C. Koopmans Research Institute |
| Number of pages | 38 |
| Publication status | Published - Feb 2009 |
Publication series
| Name | Discussion Paper Series / Tjalling C. Koopmans Research Institute |
|---|---|
| No. | 01 |
| Volume | 09 |
| ISSN (Electronic) | 2666-8238 |
Keywords
- competition
- concentration
- entry barriers
- transparency
- consolidation
- contestability
- institutional conditions
- restrictions on activities or investment
- regulation
- Panzar-Rosse model