Multimarket competition in banking, with an example from the Portuguese market

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.