Market-power versus cost-efficiency in Thailand's banking sector in the post-crisis period (1998-2011)

The degree of competition and effect of market concentration on interest rate margins in the banking sector of Thailand are estimated using the new empirical industrial organization model. We find that the collusive behavior and the market power of banks intensified during 2005-2011, after the East Asian financial crisis. Although the estimated benefit of scale economies resulting from increased concentration is statistically insignificant, its estimated impact would offset the unfavorable effect of higher market-power associated with higher concentration.