The Panzar-Rosse revenue test and market power in banking

Sherrill Shaffer, Laura Spierdijk

    Research output: Contribution to journalArticle

    Abstract

    The Panzar-Rosse H statistic is a commonly used measure of market power in banking. It is widely believed that H>. 0 is inconsistent with significant market power. This study rigorously disproves that perception. Instead, the possibility of H>. 0 under conditions of substantial market power turns out robust to the timing of banks' actions, relative costs, choice of strategic variable, degree of product differentiation, strategy (static or dynamic), and degree of heterogeneity in banks' conduct (collusive versus fringe), and hence may be common in practice.
    Original languageEnglish
    Pages (from-to)340-347
    JournalJournal of Banking and Finance
    Volume61
    DOIs
    Publication statusPublished - 2015

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