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Economic Perspectives, 26, 4th, No. 4, October 2002
Entry and competition in highly concentrated banking markets

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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