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The Efficiency Cost of Market Power in the Banking Industry: A Test of the “Quiet Life” and Related Hypotheses
Abstract
Traditional concerns about concentration in product markets have centered on the social loss associated with the mispricing that occurs when market power is exercised. This paper focuses on a potentially greater loss from market power—a reduction in cost efficiency brought about by the lack of market discipline in concentrated markets. We employ data from the commercial banking industry, which produces very homogeneous products in multiple markets with differing degrees of market concentration. We find the estimated efficiency cost of concentration to be several times larger than the social loss from mispricing as traditionally measured by the welfare triangle.
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Cited by
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Claessens, S., Demirgüç-Kunt, A., & Huizinga, H. (2001) · Journal of Banking & Finance · doi:10.1016/s0378-4266(00)00102-3 · Cited by 1,644
Bauer, P. W., Berger, A. N., Ferrier, G. D., & Humphrey, D. B. (1998) · Journal of Economics and Business · doi:10.1016/s0148-6195(97)00072-6 · Cited by 803
Self-citationDo bank regulation, supervision and monitoring enhance or impede bank efficiency?
Barth, J. R., Lin, C., Ma, Y., Seade, J., & Song, F. M. (2013) · Journal of Banking & Finance · doi:10.1016/j.jbankfin.2013.04.030 · Cited by 528
The Division of Spoils: Rent-Sharing and Discrimination in a Regulated Industry
Black, S. E., & Strahan, P. E. (2001) · American Economic Review · doi:10.1257/aer.91.4.814 · Cited by 434
Bank concentration, competition, and financial inclusion
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Metadata
- Authors
- Berger, A. N., & Hannan, T. H.
- Venue
- Review of Economics and Statistics
- Publisher
- MIT Press - Journals
- Published
- 1998-08
- Volume
- 80
- Issue
- 3
- Pages
- 454-465
- ISSN
- 0034-6535 (ISSN-L)
- 1530-9142
- OpenAlex
- W2137271626
- Cited by
- 815
- References
- 0
- FWCI
- 29.56
- Type
- journal article
- Language
- en
- Open access
- closed
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- Berger, A. N., & Hannan, T. H. (1998). The Efficiency Cost of Market Power in the Banking Industry: A Test of the “Quiet Life” and Related Hypotheses. Review of Economics and Statistics. https://doi.org/10.1162/003465398557555
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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