Banks typically have more than one branch and their activities usually span over several markets. This multilocational nature of banks generates equilibrium price dispersion. The paper proposes a spatial competition model to explain price differences across banks in the deposits market. The model allows to separate two different sources of observed market power: collusion in the industry and product differentiation induced by location in local markets. An application to Portuguese commercial banking is reported as an illustration.
|Number of pages||18|
|Journal||International Journal of Industrial Organization|
|Publication status||Published - 1 Apr 1999|
- Market power
- Multimarket competition