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A model of loan rate competition with liquidity provision by banks is used to study bank mergers. Both loan rate competition and liquidity needs are seen to be "localised" phenomena. This allows for tracing down the effects of particular types of bank mergers. As such, we contrast the effects of "revenue base enhancing" mergers with the effects of mergers "for market power". The optimal post merger loan rate and risk management decisions are derived. The fundamental trade-off between stability and efficiency is often present, indicating that the approval of bank mergers induces difficult policy choices.

Many contributions to the literature on competition in banking use the Panzar and Rosse test (1987). This test encompasses a variety of market outcomes assuming firms maximize profits. However, when applied to the banking industry, this assumption may not be always valid as banks sometimes may carry social objectives or aim to be systemic players so as to be 'too big to fail'. This then motivates different objective functions, departing from profit maximization. We present a reduced firm model where banks can pursue other goals than profit maximization. This allows us to test for behavioral changes of banks over time. Our model provides a framework to evaluate whether moral hazard issues may plague banks receiving state aid, which concerns greatly the recent debate on government intervention in financial markets during the global financial crisis in 2008. To test the impact of state aid, we examine a natural experiment in the banking sector in China in the 1990s. We cannot reject that the possibility of receiving state aid triggers moral hazard prone conduct.

Solves von Stackelberg equilibria in a Bertrand‐Edgeworth duopoly game. Shows that, initially, the environment is characterized by efficient rationing and capacity constraints. Since interest lies in sustaining monopoly outcomes from non‐co‐operative behaviour, introduces the buyout option, where rivals can absorb one another's output before any consumer. Reveals that the outcomes change drastically in that players together are able to reach the monopoly profits.

In this paper, we analyze the effects of trade, concentration and ownership on the pricing behavior of firms in two transition countries, Bulgaria and Romania. We use an extensive dataset of more than 3000 firms and sector level infirmation to estimate the effects of these three factors on the price cost margin (PCM) for the period 1994-1998. We find: 1) that trade disciplines the industry in concentrated industries; 2) that high concentration is associated with more market power; 3) that private and foreign owned firms heve higher PCMs. This indicates that the pricing strategy of private firms is inherently differentthan the one of State firms, either as the results of different objectives or induced by the abuse of market power.

The ex ante merger control process that exists at the EC as well as in many of the constituting member states is a particular type of government intervention, namely one in the market for corporate control. As such, it is supposed to correct for a market failure. Here in particular, merging firms could gain market power and raise prices at the expense of consumers in a way the welfare standard is reduced.