Abstract
The aim of the study is to analyse the explanatory factors of market power in the banking system. Using as laboratory the Spanish banking system in the period 1986–2002, results show an increase of market power from the mid‐1990s. Of the set of variables that the model posits as explaining market power, those with the greatest explanatory power are size, efficiency and specialization; concentration is not significant. This last result shows the limitations of the approaches, studies and decision‐making rules of economic policy that uses market concentration as a proxy for the degree of competition.
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