Intensity of competition and market structure in the Italian banking industry

The aim of this paper is to test the predictions of Sutton's model of independent submarkets for the Italian retail banking industry. This industry, in fact, can be viewed as made of a large number of local markets corresponding to different geographical locations. In order to do that, I first develop a model of endogenous mergers that shows how the number of firms is determined by the initial number of firms, by the intensity of competition, and by the degree of product differentiation, and how this in turn affects the one-firm concentration index. Then, in the second part, the number of banks in each submarket is estimated using a truncated model and a Poisson model. The size of the submarkets turned out to be at most provincial. Finally, the one-firm concentration ratio of each province is regressed on the number of banks, also in interaction with market size variables. As argued by Sutton for industries with exogenous sunk costs, a stronger and negative relationship is found as the market becomes larger.exogenous sunk costs, intensity of competition, concentration, truncated and Poisson models

The role of reciprocation in social network formation, with an application to blogging

This paper deals with the role of reciprocation in the formation of individuals' social networks. We follow the activity of a panel of bloggers over more than a year and investigate the extent to which initiating a relation brings about its reciprocation. We adapt a standard capital investment model to study how reciprocation affects the build-up of the individual social capital of bloggers, as measured by their links and interactions with others. This allows us to measure the role of content production and relationship building in the dynamics of online social networks and to distinguish between the social networking and media aspects of blogging.Blogs, Friendship, LiveJournal, Reciprocation, Social Capital, Social Networks

The role of reciprocation in social network formation, with an application to blogging

This paper deals with the role of reciprocation in the formation of individuals' social networks, that is to what extent initiating a relation brings about its reciprocation. Following the activity of a panel of bloggers over more than a year, we seek to establish whether bloggers are mainly involved in social networking or are part of the media industry. We adapt a standard capital investment model to study the effect of reciprocation on the building of social capital. Results of our analysis confirm that activity and reciprocation both play a role in the dynamics of social media.Bloggers, Friendship, LiveJournal, Media, Panel Data, Reciprocation, Reci procity, Social Capital, Social Networks

Credit Reporting, Access to Finance and Identification Systems: International Evidence

Credit reporting systems are an important ingredient for financial markets. These systems are based upon the unique identification of borrowers, which is enabled if a compulsory identification system exists in a country. We present evidence derived from difference-in-difference analyses on the impact of the interplay of credit reporting and identification systems on financial access and intermediation in 172 countries during years of 2000 to 2008. Our results suggest that the introduction of an identification system has a positive effect on financial intermediation (bank credit to deposits) and financial access (private credit to GDP), especially in countries where there is also a credit reporting system. This effect exists net of other country characteristics.Credit markets, information asymmetries, identification

Time Preference Instability, Financial and Working Status

In this paper we study the drivers of change in individuals’ discount rates. Our panel dataset allows us to jointly consider socio-demographics, financial status and literacy, as well as job characteristics among the possible determinants. Our results suggest that individual time-preferences are not stable over time, especially among individuals who hold debts. Labour market variables do not play any direct role. A large part of the variation, however, is not explained by none these drivers. This supports the view that discount rates are related to an underlying unobservable individual trait

Information Sharing and Cross-border Entry in European Banking

Information asymmetries can severely limit cross-border border expansion of banks. When a bank enters a new market, it has incomplete information about potential new clients. Such asymmetries are reduced by credit registers, which distribute financial data on bank clients. We investigate the interaction of credit registers and bank entry modes (in form of branching and M&A) by using a new set of time series cross-section data for the EU-27 countries. We study how the presence of public and private credit registers and the type of information exchanged affect bank entry modes during the period 1990-2007. Our analysis shows that the existence of both types of registers increases the share of branching in the overall entries. Additionally, the establishment of public registers reduces concentration ratios, and some banking competition indicators (such as overhead costs/assets). The introduction of a private credit bureau, on the other hand, has no effect on concentration ratios, but positively contributes to competition (by decreasing interest rate margins). This suggests that credit registers facilitate direct entry through a reduction of information asymmetries, which in turn intensifies competition.credit registries, foreign entry, asymmetric information

Access to Credit Information Promotes Market Entries of European Banks

When granting credit, banks depend on reliable information about the creditworthiness and risk structure of potential borrowers. This information is typically gathered by national credit bureaus. Nationally established banks depend on information from credit bureaus more than ever, particularly when entering a foreign market. This DIW study (which is partially based upon research by the same authors for the European Credit Research Institute and data collected by the institute) investigates whether the existence of credit bureaus influences European bank competition and concludes that they facilitate market entry for foreign banks. In turn, the absence of credit bureaus can create significant disadvantages in competition. In this case, a market entry is then primarily possible via the purchase of an incumbent bank, because the entering institution has essentially no other opportunity to access debtor data. This study also shows that provision of data within the EU is not harmonized overall.Credit registers, Foreign entry asymmetric information

Being nice with the experimenter?

This paper investigates the determinants of reciprocity towards the experimenters in the lab under a flat-wage scheme. We find that personality attributes – such as agreeableness – help predict the behaviour of the subjects. We additionally propose and assess a general measure of reciprocity

Mortality Salience, Self-esteem and Status Seeking

According to the Terror Management Theory, the fear of death may induce anxiety and threaten individual self-esteem. To remove this fear, individuals need to obtain and sustain self-esteem, for example by competing in rank order tournaments, or by focusing on status seeking. Within an experimental setting, this paper investigates the effect of Mortality Salience on individual productivity, manipulating the information on subjects’ relative performance in a real-effort task where the economic incentive is to not perform: in a first treatment subjects receive only private feedback, which may have effects on productivity via individual self-esteem, while in a second treatment subjects receive public feedback, which may have effects on productivity via status seeking. Our results suggest that the majority of subjects exposed to death-related thoughts tend to be more sensitive to in-group conformity when both types of feedback are provided