Location and competition in retail banking

Katherine Ho, Joy Ishii

Research output: Contribution to journalArticlepeer-review

41 Scopus citations


We investigate the impact of banking deregulation during the 1990s on consumer welfare. We estimate a spatial model of consumer demand for retail bank deposits that explicitly accounts for consumer disutility from distance traveled. This is important given the substantial changes in banks' branch networks observed in the data. Our model indicates that cross-price elasticities between banks whose branches are close to consumers ('close' banks) are larger than those between 'far' banks and more than double the cross-price elasticity of 'close' banks with respect to 'far' banks. We distinguish between thrifts and other banks and find that within-thrift competitive effects are stronger than within-bank effects or those between thrifts and banks. We use our estimates to predict the effect of changes in market structure on consumer welfare following the branching deregulation of the Riegle-Neal Act of 1994. Our results indicate that the median household gained around $60 per year from the changes. Approximately two thirds of the gains come from within-market changes in market structure. The gains were greater in markets with high initial numbers of banks than elsewhere.

Original languageEnglish (US)
Pages (from-to)537-546
Number of pages10
JournalInternational Journal of Industrial Organization
Issue number5
StatePublished - Sep 1 2011
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering


  • Bank branching
  • Banking
  • Deregulation
  • Spatial competition


Dive into the research topics of 'Location and competition in retail banking'. Together they form a unique fingerprint.

Cite this