Demand estimation for banking services in China

This dissertation consists of three chapters on demand estimation for banking services in China.;In chapter one, I examine the effects of market deregulation on consumers and state commercial banks in China. I jointly estimate a system of differentiated product demand and pricing equations under alternative market structures. Overall, I find mixed results for the banking reform. Although total surplus of the deposit market increases, welfare effects are unevenly distributed across provinces and some existing consumers experience welfare losses. Encouragingly, the market appears to be better characterized by non-cooperative competitive behavior than collusion, and price-cost margins of some state commercial banks shrink over time.;In chapter two, I develop a dynamic structural model of consumer demand for deposits to analyze the impacts of switching costs on behaviors of consumers and banks. In my model, banks provide differentiated products, and product characteristics evolve over time. Consumers choose their banks based on the utility received from using their services, and incur a fixed cost when they switch banks. Consequently, consumer choices include which bank to use and when to switch. The main finding is that switching costs have significant impacts on consumers in choosing in their deposit institutions. Consumers adjust their bank choices gradually when there are changes in bank attributes. The low price elasticity of service fees in the static demand model can be partly explained by the fixed cost incurred to switch banks.;In chapter three, I examine competition among commercial banks following deregulation in Hong Kong. I jointly estimate a system of differentiated product demand and pricing equations, and use conduct parameters to identify market structure. Overall, I find positive outcomes for the banking deregulation, which suggest that the benefits of deregulation understood in large industrialized economies indeed apply to a small open economy, Hong Kong. Encouragingly, the industry becomes more competitive and the consumers are better-off after the deregulation. Empirical results also indicate that the banking sector is characterized by non-cooperative competitive behavior. There is significant product differentiation among commercial banks in the loan market.