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  • 2022
  • Working Paper

Many Markets Make Good Neighbors: Multimarket Contact and Deposit Banking

By: Jonathan Wallen and John Hatfield
  • Format:Print
  • | Language:English
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Abstract

We investigate the relationship between the interest rates offered to consumers in a deposit banking market and the contact that banks in that market have with each other in other markets. We show, in a simple theoretical model, that such overlapping relationships lead to less competitive behavior by banks. Furthermore, we empirically test this result across U.S. deposit banking markets and find that markets in which banks have many other points of contact with each other act significantly less competitive. Our results are particularly alarming as multimarket contact has increased significantly over the last two decades while the passthrough rate between the Federal Funds rate and deposit banking rates has fallen dramatically.

Keywords

Antitrust; Deposit Banking; Market Power; Multimarket Contact; Banks and Banking; Markets; Competition

Citation

Wallen, Jonathan, and John Hatfield. "Many Markets Make Good Neighbors: Multimarket Contact and Deposit Banking." Working Paper, January 2022.
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About The Author

Jonathan L. Wallen

Finance
→More Publications

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  • The Imperfect Intermediation of Money-Like Assets By: Jonathan Wallen and Jeremy C. Stein
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  • Optimalen Capital By: Malcolm Baker, Elisabeth Kempf and Jonathan Wallen
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