[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-321086-105":59,"doc-detail-321086-en":124},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":117,"head_meta":119,"extra_data":121,"updated_unix":123},105,"en","competition-and-bank-profitability-recent-evidence-economic-commentary","Competition and Bank Profitability - Recent Evidence - Economic Commentary","","Economic commentary on how market structure—shaped by the number and size distribution of competitors—affects bank performance and regulatory assessment, especially in mergers and acquisitions. It contrasts a traditional structuralist view where concentration fosters “market power” and collusive pricing with Chicago School and contestable market arguments emphasizing potential competition and barriers to entry/exit, including sunk costs and regulatory discipline. The text discusses policy implications and recent changes in banking barriers during the 1970s–1980s.",{"@graph":69,"@context":116},[70,84,99],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/competition-and-bank-profitability-recent-evidence-economic-commentary/321086/",{"url":83,"name":65,"@type":85,"author":86,"headline":65,"publisher":89,"fileFormat":92,"inLanguage":63,"description":67,"dateModified":93,"datePublished":93,"encodingFormat":92,"isAccessibleForFree":94,"interactionStatistic":95},"DigitalDocument",{"name":87,"@type":88},"Anda","Person",{"url":74,"name":90,"@type":91},"DocShare","Organization","application/pdf","2026-09-21",true,{"@type":96,"interactionType":97,"userInteractionCount":4},"InteractionCounter",{"@type":98},"ViewAction",{"@type":100,"mainEntity":101},"FAQPage",[102,108,112],{"name":103,"@type":104,"acceptedAnswer":105},"What does the document say is the relationship between market structure and bank performance?","Question",{"text":106,"@type":107},"It argues that the number and size distribution of competitors in a market are crucial for evaluating competitive effects of bank mergers and acquisitions. It also links concentration to profitability in empirical studies, though different theories explain the direction of causality.","Answer",{"name":109,"@type":104,"acceptedAnswer":110},"How does the traditional structuralist view explain concentration and monopoly profits?",{"text":111,"@type":107},"It claims that when a few large competitors dominate, they can create and enforce tacit collusive agreements. This “market power” is said to allow firms to keep prices above costs and earn monopoly profits.",{"name":113,"@type":104,"acceptedAnswer":114},"What alternative explanations do the Chicago School and contestable market theory offer?",{"text":115,"@type":107},"They contend that monopoly power persists only when barriers prevent potential competitors from entering in response to excessive profits. They emphasize discipline from potential competition, low entry/exit barriers, and the role of sunk costs and regulation.","https://schema.org",{"og:url":83,"og:type":118,"og:title":65,"og:site_name":90,"og:description":67},"article",{"robots":120,"canonical":83},"index,follow",{"doc_id":122,"site_id":62},321086,1789958391,{"code":4,"msg":5,"data":125},{"doc_id":122,"user_id":126,"nickname":87,"user_avatar":127,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":128,"file_id":129,"file_url":130,"file_type":131,"file_size":132,"view_count":4,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":133,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":134,"faqs":135,"seo_title":136,"seo_description":67,"update_tm":123,"read_time":137},962075006959,"https://ap-avatar.wpscdn.com/avatar/e0002397efbe92a78e?_k=1776741047341049297","ECONOMICCOMMENTARY  \nThe nature of the relationship betweenthe number and size distribution of com-petitors in a market(market structure)and their performance is of crucial im-portance to bank regulators and othersresponsible for evaluating the competi-tive effects of bank and bank holdingcompany mergers and acquisitions.  \nAnalysis of such transactions hasbecome increasingly im portant in the1970s and 1980s as intra-and interstatebarriers to geographic expansion bybanks have fallen,spurring consolida-tion in the industry.  \nUntil quite recently,most observersfelt that concentration of businessactivity in the hands of a few largecompetitors in any industry inevitablycreates what is called “market power,”which allows firms to collusively raiseand maintain prices above costs inorder to earn monopoly profits.Thisview reflects several implicit assump-tions.The first is that creating andenforcing tacit collusive agreements isrelatively easy.The second assumptionis that technological conditions,regula-tion,other barriers to entry,or thethreat of predation,allow firms operat-ing in the concentrated market to dis-regard potential competitors.2  \nProponents of this traditional struc-turalist view have buttressed their casewith evidence gained from a variety ofstudies in which concentration andprofitability have been found to be posi-tively related.  \nThe public policy implication of thisempirical finding is that mergers andacquisitions that boost concentration tosome relatively high level should not bepermitted.In essence,this has been theposition of the Justice Department andbank regulators.  \nHowever,criticisms of this view haveincreased in recent years.Economistsof the so-called “Chicago School,”andproponents of contestable market the-ory,have argued that insufficient em-phasis has been given to the disciplin-ary role of potential competitors.3 Theymaintain that monopoly power can onlyexist and persist when barriers preventpotential competitors from entering amarket in response to excessive profitsearned by incumbent firms.  \nChicago School economists cite gov-ernment regulation and legislation asthe sole source of truly effective entrybarriers.Contestable market theoristsalso include the magnitude of sunkcosts,(that is,unrecoverable fixedcosts)necessary for entry into a market.If sunk costs required for entry are low,firms can easily go out of business ifthey suffer losses.Established firmsthen cannot use predatory pricing as aweapon to discourage new competitors.Thus,the ever-present threat ofcompetition from new firms effectivelyconstrains the pricing behavior of existing firms.These theorists have demon-strated that if a market is contestable,that is,with low barriers to entry andexit,it is possible to have intense com-petition,even if the number of actualcompetitors is quite small,or alterna-tively,if concentration is high.  \n1.Both the bank regulatory agencies and the Justice Department analyze the competitive impactsof bank mergers.For a summary of the proceduresee D.Lehr and L.Loevinger,\"A New Look atBank Mergers,\"Banking Expansion Reporter,January 7,1985.  \n# Competition andBank Profitability:Recent Evidence\n\nby Gary Whalen  \nChicago School economists also offeran alternative explanation for the posi-tive relationship found in empiricalwork between concentration and prof-itability.They suggest that perfor-mance determines market structurerather than the reverse.That is,thatsuperior management,luck,and/ortechnological conditions cause firms tobe profitable and to grow large,result-ing in market concentration.Thus,they claim the positive concentration-profitability relationship does notnecessarily indicate collusion.  \nNot surprisingly,given their beliefsabout the importance of potential com-petition,those who subscribe to eitherthe Chicago or the contestable marketschool have a different view about howthe government should react towardmergers.Mergers,they believe,aremotivated by a desire to gain a size-related cost advantage","cbCait8eh3kZQexy","https://ap.wps.com/l/cbCait8eh3kZQexy","pdf",1505830,"English","# Competition and Bank Profitability: Recent Evidence\n## Structuralist View of Concentration and Market Power\n## Chicago School and Contestable Market Theory\n## Policy Implications for Bank Mergers\n## Changes in Barriers and Industry Consolidation","[{\"question\":\"What does the document say is the relationship between market structure and bank performance?\",\"answer\":\"It argues that the number and size distribution of competitors in a market are crucial for evaluating competitive effects of bank mergers and acquisitions. It also links concentration to profitability in empirical studies, though different theories explain the direction of causality.\"},{\"question\":\"How does the traditional structuralist view explain concentration and monopoly profits?\",\"answer\":\"It claims that when a few large competitors dominate, they can create and enforce tacit collusive agreements. This “market power” is said to allow firms to keep prices above costs and earn monopoly profits.\"},{\"question\":\"What alternative explanations do the Chicago School and contestable market theory offer?\",\"answer\":\"They contend that monopoly power persists only when barriers prevent potential competitors from entering in response to excessive profits. They emphasize discipline from potential competition, low entry/exit barriers, and the role of sunk costs and regulation.\"}]","Competition and Bank Profitability - Recent Evidence - Economic Commentary | PDF",13]