The Effect of Economies of Scope on Iranian Banking Sector Structure: An Application of Multi-Product Function and Multi-Level Effect Approaches

• Main Authors: Mahmodpour Kamran, Shahiki Tash Mohammad N., Fotros Mohammad Hassan
• Format: Article
• Language: English
• Published: Editura Universităţii „Alexandru Ioan Cuza” din Iaşi / Alexandru Ioan Cuza University of Iasi Publishing house 2018-12-01
• Series: Scientific Annals of Economics and Business
• Subjects: Iranian banking sector; variety-based economies; multi-level model; market structure; the generalized Panzar-Rosse model; L1; G21; F36
• Online Access: http://www.degruyter.com/view/j/saeb.2018.65.issue-4/saeb-2018-0016/saeb-2018-0016.xml?format=INT
• ISSN: 2501-3165

This paper investigates, using a multi-product paradigm, the market structure of the Iranian banking sector to evaluate the role of scale. In so doing, we checked for economies of scope by multi-product cost function as well as the impact of potential economies on the banking sector structure including 18 banks during the period 2008–2014. The changes in Panzar-Rosse H-Statistic as a result of the variety in products reflect changes in the monopolistic power. The results show that an increase in the variety of offered products increases banks’ monopolistic power.