Competition Conditions and Market Power in the Mexican Commercial Banking Market. A Microeconomic Theoretical Approach
| Autor | Lartigue Mendoza Jacques, Ayala Navarro Kenneth, Sauri Alpuche Gustavo |
| Cargo | PhD in Economics. Professor/Researcher at the Universidad Anáhuac México, Faculty of Economics and Business, Av. de las Torres no. 131, Olivar de los Padres, C.P. 01780, Mexico City, Mexico. Email: jacques.lartigue@anahuac.mx, https://orcid.org/0000-0001-9741-6851 - MA in International Relations, Director of Economic Promotion for the American ... |
| Páginas | 367-401 |
367
Recibido: 1 de marzo de 2020
Concepto de evaluación: 28 de abril de 2020
Aprobado: 13 de mayo de 2020
Revista Finanzas y Política Económica, Vol. 12, N.° 2, julio-diciembre, 2020, pp. 367-402
https://doi.org/10.14718/revfinanzpolitecon.v12.n2.2020.2814
Competition Conditions and
Market Power in the Mexican
Commercial Banking Market.
A Microeconomic Theoretical
Approach
Abstract
This study assesses, from a microeconomic theoretical
perspective, competition conditions and market power in
the Mexican commercial banking market. Our econometric
estimations, using time series, indicate a low price elasticity
of demand for bank credit, which, in combination with high
market shares and according to the Lerner index, indicates
that major banks have elevated market power; the proffered
values of the Lerner index range between (0.11) and (0.68)
for the seven leading banks, (0.00) for small banks, and
(0.34) for the weighted average of the entire market. On the
other hand, the estimated competition indicators confirm
the exercise of market power and the lack of a competitive
market, during at least the last decade, resulting in a large
fraction of unserved economic agents by commercial banks.
Keywords: Mexican commercial banking market;
competition conditions; market power.
JEL Classification: D43, G21, L40.
Artículo de investigación
© 2020 Universidad Católica de Colombia.
Facultad de Ciencias
Económicas y Administrativas.
Todos los derechos reservados
Jacques Lartigue-Mendoza*
Kenneth Azael Ayala-Navarro**
Gustavo Enrique Sauri-Alpuche***
Recibido: 1 de marzo de 2020
Concepto de evaluación: 27 de junio de 2020
Aprobado: 13 de agosto de 2020
* PhD in Economics. Professor/Researcher
at the Universidad Anáhuac México,
Faculty of Economics and Business, Av. de
las Torres no. 131, Olivar de los Padres,
C.P. 01780, Mexico City, Mexico. Email:
jacques.lartigue@anahuac.mx,
https://orcid.org/0000-0001-9741-6851
** MA in International Relations, Director
of Economic Promotion for the American
Continent and Europe. Secretariat of
Foreign Affairs, Mexico City, Mexico.
Email: kayalan@sre.gob.mx,
https://orcid.org/0000-0003-3417-5370
*** PhD Candidate in Political and Social
Sciences, MA in Economics. Universidad
Anáhuac México, Faculty of Economics
and Business, Mexico City, Mexico.
Email: gsauri@anahuac.mx,
https://orcid.org/0000-0003-0721-1313
Artículo de investigación
© 2020 Universidad Católica de Colombia.
Facultad de Ciencias
Económicas y Administrativas.
Todos los derechos reservados
368
Finanzas y Politíca Económica, Vol. 12, N.° 2, julio-diciembre, 2020, pp. 367-402
Condiciones de competencia y poder de
un enfoque desde la teoría microeconómica
Resumen
La presente investigación analiza, desde la perspectiva
de la teoría microeconómica, las condiciones de competencia
y la existencia de poder de mercado en el mercado mexicano
de la banca comercial. Las estimaciones econométricas, ba-
sadas en series de tiempo, indican una baja elasticidad precio
de la demanda para el crédito bancario que, en combinación
con altas tasas de participación de mercado, indican conforme
al índice de Lerner un elevado poder de mercado en posesión
de los grandes bancos. Los valores de dicho índice se estiman
entre 0.11 y 0.68 para los siete bancos más grandes, 0.00 para
los bancos pequeños, y 0.34 para el promedio ponderado de
la totalidad del mercado. Por su parte, los indicadores de
competencia confirman el ejercicio del poder de mercado y la
inexistencia de un mercado competitivo, durante al menos la
última década, resultando en un amplio porcentaje de agentes
económicos no atendidos por la banca comercial.
Palabras clave: mercado de la banca comercial mexi-
cana; condiciones de competencia; poder de mercado.
369
INTRODUCTION
Due to its preeminent status as an intermediary in the saving-investment process,
as well as to its subsequent relevance in the assignment of resources, economic
growth and income distribution the inancial sector has been a recurring topic in
both empirical and non-empirical research since the beginning of the twentieth
century (
Caprio & Honohan, 2001;
King Levine Levine
From a theoretical standpoint, both classical and endogenous growth theories
assume equality between savings and investment implicitly meaning that the banking
system is capable of moving saved resources to investment through a competitive
market
When it comes to income distribution the banking system acquires similar
relevance as in previous theories given that an inclusive banking system contribu-
tes to breaking up poverty cycles Since individuals at the lowest income levels are
severely constrained to savegiven that a great share of their earnings goes directly
to subsistence consumption access to inance is a key tool for them to invest
achieving this way larger incomes in later periods
Increased competition in the commercial banking market as in any other
market drives overall eficiency lowers prices and expands the choices of goods
and services offered In particular a competitive banking system as opposed to an
oligopoly decreases netinterest margins provides lowcost banking commissions
delivers channels to fund more productive projects, and expands the pool of cus-
tomers leading to a range of beneits which include greater competitiveness of
industries in need of inancial services expanded national production and improved
consumer surplus and social welfare
Building on the arguments described above, the motivation for any effort to
achieve a commercial banking system with the conditions of a competitive market
becomes evident Within this line the present research aims to assess competition
conditions in the Mexican commercial banking market estimate the observed mar-
ket power and integrate their analyses through microeconomic theory This way it
seeks to ill the existent research vacuum on this topic
The study estimates market power using the Lerner index Using the presen-
ted methodology it is necessary to estimate the price elasticity of demand for bank
credit the results of which are also exposed In order to provide a robust analysis
Competition Conditions and Market Power in the Mexican Commercial Banking Market.
A Microeconomic Theoretical Approach
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