Managing the endogeneity problem of the market structure: a study on banking competition
Recent literature suggests that the market structure is an endogenous variableÂ that is determined by a firmâ€™s behaviour and the competitive environment ofÂ the industry. This study examines the relation between the market structure andÂ the banksâ€™ behaviour in Indonesian banking by considering the endogeneityÂ problem of them as variables. The estimations using the Vector-Error-Correction approach suggest that the structural approach provides a valid predictionÂ of the relationship between market structure and bank behaviour byÂ recognizing the endogeneity issue between those two variables. The bankingÂ industry would be more competitive if the market was less concentrated.
Economic Journal of Emerging Markets indexed in: