Premium
Market Size, Service Quality, and Competition in Banking
Author(s) -
DICK ASTRID A.
Publication year - 2007
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.0022-2879.2007.00003.x
Subject(s) - market size , competition (biology) , quality (philosophy) , population size , business , population , monetary economics , service (business) , economics , commerce , marketing , ecology , philosophy , demography , epistemology , sociology , biology
Local banking markets depict enormous variation in population size. Yet this paper finds that the nature of bank competition across markets is strikingly similar. First, markets remain similarly concentrated regardless of size. Second, the number of dominant banks is roughly constant across markets of different size; it is the number of fringe banks that increases with market size. Third, service quality increases in larger markets and is higher for dominant banks. The findings suggest that banks use fixed‐cost quality investments to capture the additional demand when market size grows, thereby raising barriers to entry.