Instructions on Assessment
The assessment comprises a 2500 word essay on the following topic:
The commercial banking sector in the US
Use the Structure-Conduct-Performance (SCP) framework in order to analyze the banking sector in the US. Your analysis should cover in detail all the main points in the SCP analysis. More specifically:
a) You are required to analyze the marketstructure by discussing each of the following:
i) at least 2 demand and 2 supply side conditions affecting the structure
ii) the number and size distribution of buyers and sellers (i.e.: use measures of seller concentration such as: n-firm concentration ratio and the HHI index)
iii) entry/exit conditions
iv) diversification and integration
b) Your analysis of conduct should discuss the strategies used by the main companies in the market in order to increase their profit and/or market power. The strategies you identify should relate to at least 2 (two) of the following:
i) advertising and marketing
ii) product differentiation
iv) merger and acquisition activity
c) You must discuss and, whenever possible, provide data for at least 2 (two) relevant performance measures among the following:
ii) revenue growth
iii) technological progress
v) productive and allocative efficiency
Argue whether or not a link can be established from structure through conduct to performance.
Once you have completed the SCP analysis, answer1 (one) out of 3 (three) ofthe following questions:
a) There are number of drawbacks to the SCP framework. Focusing on the US banking sector, indicate one significant drawback to the SCP hypothesis.
b) What is the persistence of profit(POP) approach? Are there evidences for POP to hold in the US banking sector?
c) A number of studies in banking examine how risk and performance are affected by factors such as laws concerning investor protection, bank regulation, and the extent of ownership concentration. Please discuss how corporate governance affects financial performance in the US banking sector.
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