Oligopoly in loan and deposit markets: an econometric application to the Netherlands

Summary This paper presents evidence on the degree of oligopoly in Dutch loan and deposit markets. Using cointegration tests, dynamic specifications are developed for the demand for mortgages, the supply of savings deposits and the associated interest rates. Simultaneous estimation of this model over the period 1957–1990 reveals that in recent years, both markets were significantly more oligopolistic than in Cournot equilibrium. However, competition for mortgages has significantly intensified since the late 1950s. The degree of oligopoly in the market for savings deposits, on the other hand, shows a significant rise over the sample period, probably owing to increased market concentration.This paper, which is a revised version of chapter 4 of my (unpublished) Ph.D. thesis, has greatly benefited from the comments by Lex Hoogduin, Gerard Korteweg and two anonymous referees of this journal. Thanks are also due to Coby Hogewoning and Gwan Tjia, who assisted in collecting the data. All errors and opinions are mine.