Assessing Competition with the Panzar-Rosse Model: The Role of Scale, Costs, and Equilibrium
By J. Bikker, Sherrill Shaffer, Laura Spierdijk. Review of Economics and Statistics, 2012
332 citations recorded by the source corpus.
Abstract The Panzar-Rosse test has been widely applied to assess competitive conduct, often in specifications controlling for firm scale or using a price equation. We show that neither a price equation nor a scaled revenue function yields a valid measure for competitive conduct. Moreover, even an unscaled revenue function generally requires additional information about costs and market equilibrium to infer the degree of competition. Our theoretical findings are confirmed by an empirical analysis of competition in banking, using a sample containing more than 100,000 bank-year observations on more than 17,000 banks in 63 countries during the years 1994 to 2004.
Subfields: Accounting, Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/bb478ab8a041ccc29a60c1722c2020c6041ef222
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Citations in the corpus
- Do foreign banks increase competition? Evidence from emerging Asian and Latin American banking markets (2011, background): “10 Bikker et al. (2009) caution that including a scale variable such as total assets or income in the control variable set in the revenue or price equations creates a significant upward bias and incorrect measures of the degree of competition.”
- What are the driving forces of bank competition across different income groups of countries (2014, background): “…H-statistic to gauge the degree of bank competition, see, e.g. Mamatzakis et al. (2005), Levy Yeyati and Micco (2007) and Delis (2010) for emerging economies, and Matthews et al. (2007) an Goddard and Wilson (2009) for advanced economies (for a comprehensive study see also Bikker et al., 2012).”