Assessing bank competition for consumer loans

Wilko Bolt, David Humphrey*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


Based on frontier analysis, we derive inferences of bank consumer loan competition from estimating a revenue-cost 'competition efficiency' (CE) frontier. The competitiveness of the $400 billion U.S. bank consumer loan market is then assessed by comparing results from our frontier CE measure with other competition measures, such as HHI, Lerner Index, and H-Statistic. These measures are weakly related to one another and only half of them identify banks with the highest loan price as also being the least competitive. This is the opposite of what is expected. Using the frontier CE measure, the most and least competitive banks are not located in the most populous states and the largest banks are underrepresented. Overall, the HHI should not be used to indicate competition.

Original languageEnglish
Pages (from-to)127-141
Number of pages15
JournalJournal of Banking and Finance
Publication statusPublished - 1 Dec 2015


  • Bank competition
  • Consumer loans
  • Frontier analysis


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