This paper examines the relationship between product market competition and employment discrimination using an especially constructed data set that links microeconomic data on female employment with measures of market concentration in the banking industry. The use of firm-specific data drawn from this one industry allows estimation of this relationship in a manner that avoids the problems of interindustry differences that have troubled previous studies. The results provide strong support for a negative relationship between market concentration and the relative employment of women. Further, we find that individual market shares are unrelated to female employment, suggesting that the relationship is due primarily to differences across markets rather than individual firms.

Traditional concerns about concentration in product markets have centered on the social loss associated with the mispricing that occurs when market power is exercised. This paper focuses on a potentially greater loss from market power—a reduction in cost efficiency brought about by the lack of market discipline in concentrated markets. We employ data from the commercial banking industry, which produces very homogeneous products in multiple markets with differing degrees of market concentration. We find the estimated efficiency cost of concentration to be several times larger than the social loss from mispricing as traditionally measured by the welfare triangle.

Berger, Allen N., and Timothy H. Hannon, The Price-Concentration Relationship in Banking, this REVIEW 71 (May 1989), 291-299. Demsetz, Harold, Industry Structure, Rivalry, and Public Policy, Journal of Law and Economics 16 (Apr. 1973), 1-9. Jackson, William E. III, Market Structure and Price Adjustments: Evidence from the Banking Industry, unpublished Ph.D. dissertation, University of Chicago, June 1989. Peltzman, Samuel, The Gains and Losses from Industrial Concentration, Journal of Law and Economics 20 (Oct. 1977), 229-263. Salinger, Michael, The Concentration-Margins Relationship Reconsidered, in Brookings Papers on Economic Activity: Microeconomics, Martin N. Bailey and Clifford Winston, (eds.), Brookings (Washington, D.C.: Brookings Institution, 1990). 5 No formal statistical tests of the differences in the estimated coefficients of CONC across subsamples were conducted. This analysis was concerned more with the sign and significance level of each subsample estimated CONC coefficient.

The commonly observed positive correlation between market concentration and profitability may be explained by noncompetitive pricing behavior, as argued by the structure-performance hypothesis, or by the greater efficiency of firms with dominant market shares, as argued by the efficient-structure hypothesis. By examining the price-concentration relationship instead of the profit-concentration relationship, this paper tests the structure-performance hypothesis in a manner that excludes the efficient-structure hypothesis as an alternative explanation of the results. The results strongly support the structure-performance hypothesis and are robust with respect to model specification, measurement of concentration, and econometric technique.

Findings do not indicate poorly-managed firms are more likely to be acquired than well-managed firms. The analysis uses a sample of 1, 046Texas banks that existed in 1970, out of which 201 were acqui red during the period 1970-82. A multinomial logit procedure is used to estimate the relationship between the likelihood of acquisition and the characteristics of the target firm and its market. Additional results suggest that firms with la rge market shares, low capital/asset ratios, and operations in urban areas are r elatively likely to be acquired but not firms with low profits or low growth.

We employ a procedure suggested by the Department of Justice's Merger Guidelines (but never before applied to banking) to determine whether nonbank financial institutions should be included as participants in defining the product market relevant to antitrust analyses of proposed bank mergers. We estimate bank “residual supply” relationships indicating the responsiveness of small-scale deposit funds supplied by consumers to the level of interest rates offered for such deposits. Estimated elasticities of residual deposit supply are quite small, implying that only commercial banks should be included as participants in the “antitrust market” relevant to proposed bank mergers.