We show that bank branching tends to mitigate localized market power by broadening the geographic scope of competition among banks, even though branch banking allows banks to differentiate themselves through their choices of branch locations. Banking services at peripheral locations will be priced more competitively when those locales are served by branch networks. We develop a theoretical model in support of this view and offer empirical evidence.

This content is only available as a PDF.
© 1998 President and Fellows of Harvard College and the Massachusetts Institute of Technology
1998
You do not currently have access to this content.