We assess competition among retail depository institutions in 1,884 rural markets. We estimate an equilibrium market structure model that endogenizes the operating decisions of three types of depository institutions: multimarket banks, single-market banks, and thrift institutions. Observed market structures and a game-theoretic specification of entry behavior identify the parameters of an underlying profit function. We find strong evidence that product differentiation generates additional profits for retail depository institutions. These profits help to maintain smaller banks and thrifts, even as larger banks expand their operations. Consumers have more options, as more institutions can profitably operate as a result of product differentiation.

Using proprietary data on stock loan fees and quantities from a large institutional investor, we examine the link between the shorting market and stock prices. Employing a unique identification strategy, we isolate shifts in the supply and demand for shorting. We find that shorting demand is an important predictor of future stock returns: An increase in shorting demand leads to negative abnormal returns of 2.98% in the following month. Second, we show that our results are stronger in environments with less public information flow, suggesting that the shorting market is an important mechanism for private information revelation.