Heterogeneous decision-making and market power: an application to Eurozone banks
We provide a structural model wherein the decision-makers are payoff maximizers in a general game theoretic setting in which heterogeneity is formally factored into the decisions of the players. The decision-makers are allowed to have different groups; and parameters are the same within each group but they differ across group. Using insights from our treatment of heterogeneous and strategic decision-making, we estimate the conducts (market powers) of Eurozone banks for years 2002–2015. We find that Eurozone banks are fairly competitive. However, banks in peripheral countries have more market power compared to the core of Eurozone.
Kutlu, L., Sickles, R.C., Tsionas, M.G. et al. Heterogeneous decision-making and market power: an application to Eurozone banks. Empir Econ (2022). https://doi.org/10.1007/s00181-022-02239-z