A1346
Title: Deposit market competition with entry and menu choice
Authors: Jangsu Yoon - University of Wisconsin-Milwaukee (United States) [presenting]
Yunhan Shin - Bank of America (United States)
Abstract: The determinants of the deposit market structure in the U.S. banking sector are studied. The structural model with three-stage empirical games incorporates the bank's entry and menu choice decisions into the traditional deposit rate competition framework. The estimation focusing on the competition among the top 5 banks demonstrates that strategic interactions significantly influence entry decisions and deposit menu compositions, impacting market shares and deposit rates. Three counterfactual scenarios are simulated, motivated by empirical observations after the financial crisis 2008. The model-based prediction indicates that, excluding the menu composition channel, the conventional deposit competition model may have a misleading implication.
