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Federal Reserve Bank of Chicago
Economic Perspectives
Entry and competition in highly concentrated banking markets
Nicola Cetorelli
Abstract

This article studies conditions of entry and competitive conduct in highly concentrated banking markets. The author estimates the minimum market size at which a second bank, a third, a fourth, and so on, can enter and maintain long-run profitability. The results suggest no evidence of cartel-like behavior, where banks collude and maximize joint monopoly profits, even in markets with only two or three banks. The results are more consistent with the competitive conduct predicted by models of oligopolistic behavior.


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Nicola Cetorelli, "Entry and competition in highly concentrated banking markets" , Federal Reserve Bank of Chicago, Economic Perspectives, issue Q IV, pages 18-27, 2002.
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Keywords: Bank competition ; Bank marketing
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