Non-price strategic behavior: the case of bank branches

Kim, Moshe; Vale, Bent

doi:10.1016/s0167-7187(00)00064-3

Cited by 59 publications

(38 citation statements)

References 32 publications

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“…Kim and Vale (2001) consider the role of the branch network in the provision of loans in Norway and estimate a model of branching decision where banks explicitly take into account both their own existing network and their expectation of rivals' choices. They set up a non-price oligopolistic model of bank behaviour in the loans market, while also analyzing the role of the branch network in banks' behaviour and testing oligopolistic conduct in this sector.…”

Section: "Two-stage" Competitionmentioning

confidence: 99%

“…Carbo Valverde et al (2009) start from the analysis of Kim and Vale (2001) to build a model where banks can compete with rivals in prices for deposits and loans as well as in branches. They fit this model to a sample of data for the Spanish banking system, and their results reveal that price competition in Spain decreased in the loan market but increased in the deposit market over the period 1986-2002, and also that the relative intensity of price versus non-price competition varied over time.…”

Section: "Two-stage" Competitionmentioning

confidence: 99%

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Banks as ‘fat cats’: Branching and price decisions in a two-stage model of competition

Coccorese

2012

Journal of Economics and Business

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a b s t r a c tIn this paper we develop an empirical two-stage model of price competition for the banking industry that incorporates the choice of capacity in the form of new branches. This is achieved by supplementing the customary two-equation framework (demand plus first-order condition in the loan market) with the addition of a third equation that endogenizes the investment decision regarding the branch network. The model is estimated using data on a group of large and medium Italian banks for the years 1995-2009. The results show that the conduct of banks is significantly more competitive than a Bertrand-Nash equilibrium, and support the rejection of the simple one-stage specification, which underestimates the degree of competition. In the taxonomy of Fudenberg and Tirole (1984), the banks in the sample are found to behave as 'fat cats', overinvesting in the branch network so as to keep prices high and accommodate entry.

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Section: "Two-stage" Competitionmentioning

confidence: 99%

Section: "Two-stage" Competitionmentioning

confidence: 99%

Banks as ‘fat cats’: Branching and price decisions in a two-stage model of competition

Coccorese

2012

Journal of Economics and Business

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show abstract

“…In this sense, competition in branches can lead to ''overbranching'', where banks use additional branches to increase market share. According to Kim and Vale (2001), any such increases in market share come solely from stealing customers from competitors and not through finding untapped niches in the market.…”

Section: Overview Of Relevant Theoriesmentioning

confidence: 99%

Does post-crisis restructuring decrease the availability of banking services? The case of Turkey

Damar

2007

Journal of Banking & Finance

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“…Pinho (2000) studied the impact of deregulation on price and non-price competition in the Portuguese deposits market from 1986 to 1992 using the number of branches and advertising expenditures as nonprice competitive variables. Kim and Vale (2001) found that the branch network is used as a strategic non-price variable in banking conduct.…”

Section: Banks' Service Quantity Measuresmentioning

confidence: 99%

“…In fact, the non-price efforts of banks are significantly related to service quantity, the focus of this study. Applications of non-price competition are diverse: branch expansion, advertising (Kim & Vale, 2001;Pinho, 2000), and non-interest payments (free checking and other added conveniences, ATMs, extension of business hours etc.) (Fraser, Gup & Kolari, 2001).…”

Section: Introductionmentioning

confidence: 99%