Working Paper: CEPR ID: DP4817
Authors: Robert DeYoung; Evren R. S.
Abstract: We derive five hypotheses regarding market competition, price, and advertising from a theoretical model of a profit maximizing depository institution, and test these conjectures in a simultaneous system of deposit interest rates and advertising expenditures for a data panel of 1,867 thrift institutions that offer 13 different deposit products in 666 local markets in the US between 1994 and 2000. We find some support for each of our hypotheses ? branding, information, Dorfman-Steiner, structure-advertising, and structure-price ? with the strength of the results often depending on the attributes of the deposit products or the characteristics of the thrifts.
Keywords: advertising; depository institutions; structure-performance
JEL Codes: G21; L10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Advertising Expenditures (M37) | Deposit Interest Rates for Now Accounts (E43) |
| Advertising Expenditures (M37) | Deposit Interest Rates for Standardized Time Deposit Products (E43) |
| Advertising Expenditures (M37) | Profit Margins (L21) |
| Market Concentration (L11) | Deposit Interest Rates (E43) |