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Is competition among cooperative banks a negative sum game?

Published online by Cambridge University Press:  18 February 2019

Paolo Coccorese  and
Giovanni Ferri
Paolo Coccorese*
Affiliation:
Department of Economics and Statistics, University of Salerno, Fisciano, Italy
Giovanni Ferri
Affiliation:
Department of Economics, Political Sciences and Modern Languages, Lumsa, Rome, Italy
*
*Corresponding author. Email: coccorese@unisa.it
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Abstract

Does ‘inner competition’ – rivalry among network members – worsen performance in a network of cooperative banks? By weakening the functionality of the network, inner competition might, in fact, endanger network-dependent scale economies. Testing our hypothesis on Italy's network of mutual cooperative banks (Banche di Credito Cooperativo – BCCs), we find a worsening of performance of both incumbents and (even more) aggressors when BCCs compete among themselves. However, the worsening is mild when BCCs compete with comparable non-mutual banks external to the BCC network. We conclude that inner competition among cooperative banks is a negative sum game and, thus, limiting it would be desirable to preserve the stability of cooperative banking networks.

Keywords

Cooperative banksrivalry among network membersstrategic interactionsnegative sum game
Type
Research Article
Information
Journal of Institutional Economics , Volume 15 , Issue 4 , August 2019 , pp. 673 - 694
Copyright
Copyright © Millennium Economics Ltd 2019 

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