A SPATIAL MODEL OF THE BANKING INDUSTRY.

This paper explains a number of banking structure variables in the context of simultaneous profit maximization by oligopolistic firms. Interdependence among firms is characterized a la Hotelling (1929). Demand for bank output is formulated in a spatial context, representing a city or SMSA, so that quantity demanded depends on both price and the distance the consumer must travel. Firms display identical cost functions which are linear in output. Regulatory control of entry is represented explicitly and two firms, at most, enter at a time. Since the entry process is sequential, adjustment paths as well as equilibria are described. Endogenous variables include the number of firms (unit-banking is assumed throughout) in the industry, their location and the price, output and profit of each firm. The price paid for such detail is a degree of complexity that necessitates numerical specification of parameters in order to obtain a solution. [ABSTRACT FROM AUTHOR]