A general test of competitive conditions in the UK building society Mortgage Market: 1990-95.

Abstract

The Rosse-Panzar statistic is used to test for market conduct and contestability within the UK building society mortgage market between 1990 and 1995. The statistic considers the distinction between monopolistic competition and profit maximising monopoly. Following Panzar and Rosse (1987), analysis of monopolistic competition can be seen to be concerned with both an individual and a group equilibrium. The comparative static approach of the Rosse-Panzar statistic is employed to test for this situation. Evidence of long-run competitive equilibrium or profit maximising monopoly is rejected. Presence of a contestable market with monopolistic competition is not rejected. The stability of incumbents market share is employed to test for a small firms bias (Shaffer, 1982). Evidence of a small firms bias is rejected.