The Effect of Economies of Scope on Iranian Banking Sector Structure: An Application of Multi-Product Function and Multi-Level Effect Approaches

Kamran Mahmodpour, Mohammad Nabi Shahiki Tash, Mohammad Hassan Fotros

Abstract


This paper investigates, using a multi-product paradigm, the market structure of the Iranian banking sector to evaluate the role of scale. In so doing, we checked for economies of scope by multi-product cost function as well as the impact of potential economies on the banking sector structure including 18 banks during the period 2008–2014. The changes in Panzar-Rosse H-Statistic as a result of the variety in products reflect changes in the monopolistic power. The results show that an increase in the variety of offered products increases banks’ monopolistic power.


 


Keywords


Iranian banking sector; variety-based economies; multi-level model; market structure; the generalized Panzar-Rosse model.

JEL Codes


L1, G21, F36

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References


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DOI: http://dx.doi.org/10.2478/saeb-2018-0016

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