Simone Raab, Peter Welzel
The Economics of Regional Demarcation in Banking
Abstract:
Cooperation among savings and cooperative banks was criticized by the
European Commission because of potentially anti-competitive effects. In
an industrial economics model of banks taking deposits and giving loans
we look at regional demarcation as one of such cooperative practices.
There are two adjacent markets with one savings or cooperative bank
being focused on each one and one private commercial bank serving both.
We find that abolishing regional demarcation indeed increases total
loan volume. Savings or cooperative banks always improve market
performance and do better without regional demarcation which shields
the private commercial bank from aggressive competition by these banks.
JEL: G21, L41, L44, L33, L13
Paper:
Paper available as pdf-file.
Beitrag Nr. 308, Volkswirtschaftliche Diskussionsreihe, Institut
für
Volkswirtschaftslehre der Universität Augsburg
Contact:
Simone
Raab, University of Augsburg, Department of
Economics,
D-86135
Augsburg,
Germany, phone +49-821-598-4195, fax +49-821-598-4230
E-Mail: simone.raab@wiwi.uni-augsburg.de
Peter
Welzel, University of Augsburg, Department
of
Economics, D-86135 Augsburg, phone
+49-821-598-4185, fax
+49-821-598-4230
email: peter.welzel@wiwi.uni-augsburg.de
v.
K., 18.01.2010