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Title:Contestability, Technology and Banking PDF Logo
Authors:Gropp, Reint Eberhard
Corvoisier, Sandrine
Issue Date:2009
Series/Report no.:ZEW Discussion Papers 09-007
Abstract:We estimate the effect of internet penetration on retail bank margins in the euro area. Based on an adapted Baumol [1982] type contestability model, we argue that the internet has reduced sunk costs and therefore increased contestability in retail banking. We test this conjecture by estimating the model using semi-aggregated data for a panel of euro area countries. We utilise time series and cross-sectional variation in internet penetration. We find support for an increase in contestability in deposit markets, and no effect for loan markets. The paper suggests that for time and savings deposits, the presence of brick and mortar bank branches may no longer be of first order importance for the assessment of the competitive structure of the market.
Subjects:Banking structure
Contestability
Internet
JEL:G21
E43
D43
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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