The economics of regional demarcation in banking

  • Cooperation among savings and cooperative banks was criticized by the European Commission because of potentially anti-competitive effects. In an industrial economics model of banks taking deposits and giving loans we look at regional demarcation as one of such cooperative practices. There are two adjacent markets with one savings or cooperative bank being focused on each one and one private commercial bank serving both. We find that abolishing regional demarcation indeed increases total loan volume. Savings or cooperative banks always improve market performance and do better without regional demarcation which shields the private commercial bank from aggressive competition by these banks.

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Author:Simone RaabGND, Peter WelzelGND
Frontdoor URL
Series (Serial Number):Volkswirtschaftliche Diskussionsreihe (308)
Publisher:Volkswirtschaftliches Institut, Universität Augsburg
Place of publication:Augsburg
Type:Working Paper
Year of first Publication:2010
Publishing Institution:Universität Augsburg
Release Date:2020/02/20
Tag:JEL: G21, L41, L44, L33, L13
Also published in: Schmalenbach Business Review, volume 63 (2011), pages 120–144 ;
Institutes:Wirtschaftswissenschaftliche Fakultät
Wirtschaftswissenschaftliche Fakultät / Institut für Volkswirtschaftslehre
Wirtschaftswissenschaftliche Fakultät / Institut für Volkswirtschaftslehre / Lehrstuhl für Ökonomie der Informationsgesellschaft
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Journals:Volkswirtschaftliche Diskussionsreihe
Licence (German):Deutsches Urheberrecht