Intensity of Competition and Conduct Parameters in the Honduran Banking sector

Abstract

This paper analyzes the intensity of competition among commercial banks in Honduras during the period 2003-2012, through the calculation of a series of conduct parameters. We use three different approaches: an average of Lerner indices, a regression analysis that follows a “structure-conduct-performance” model, and another one that estimates a demand and supply of banking funds. We end up with the conclusion that the market is far from perfect collusion and, on the contrary, is considerably competitive, although some results seem to support the thesis that there is oligopolistic competition while others place the market close to perfect competition. We also find some evidence that indicates that the intensity of competition might have diminished in the period 2009-2012 (in comparison with the period 2003-2006).

JEL classification: C36 ; G21 ; L13