Competitive dynamics in the banking sector

The Treasury presentation earlier in the week to the Senate inquiry on competition in the banking sector drew attention to a number of significant developments which have, collectively, altered the competitive dynamics of the retail banking sector in recent years.

there has been further consolidation in the Australian banking sector since the global financial crisis.

A consequence of these factors is that the four major banks have expanded their collective market share across a range of loan and deposit products.

This is illustrated in the home loan market (Chart 5). The share of total housing loan credit for the five largest banks - the four major banks (Commonwealth Bank, NAB, ANZ and Westpac) plus St George - has increased from around 60 per cent before the onset of the GFC in mid-2007 to around 73 per cent.

Collusion for Illusion (Opinion Piece)

Australia's Big 4 promote competitiveness amongst themselves when they are all owned by the same financial (mostly foreign) interests

So what do Australia's "Big 4″ have in common besides siphoning all our money into their coffers? NAB, ANZ, Westpac & Commonwealth Bank are publicly listed companies. So that means they have shareholders right? Well did you know that the top 4 shareholders in each of the "Big 4″ are in fact the same?

They would have you believe that they're all competing with each other and in that spirit of competitiveness give you the power to choose a product best suited for you over the others. This power never existed. Well, that's not totally accurate. You were given the illusion of power. ...The big banks are in fact colluding in order to retain the power you thought you had...

1. Read the above articles and answer the following questions:

a) In your opinion, what type of market structure do Australian Banks operate in? Justify your answer with reference to research and theory.

b) Critically compare a collusive oligopoly market structure with perfect competition in terms of price, output, allocative efficiency and consumer and producer surplus. Support your analysis with economic theory and graphs.

c) Are there any situations where a market structure with less competition has some benefits? Why or why not? Briefly explain your answer with reference to at least two sources.

2. In a perfectly competitive market for apples explain would happen in the short-run to the market and to individual producers if the price for pears went up. Demonstrate your answer using a diagram. With reference to the same diagram show what would happen to the market and individual producers in the long-run.

Attachment:- Assignment.pdf