Changes in market structure in the internet era: banking and yellow pages advertising
Kafali, Elif Nilay
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The rapid expansion of Internet use at the turn of the 21st century brought with it a new medium of commerce. As the Internet started to act as a substitute for traditional retail and service sectors, an important economic question has been the impact of this change on mar- ket structure in different industries. This dissertation examines the changing structure of two particular industries in this new era of the Internet: the banking industry and Yellow Pages advertising. Chapter I examines whether bank branches are still important in attracting deposits from consumers. Despite their historic role in helping commercial banks to grow, branches may be decreasing in importance today due to the widespread use of Internet banking. The paper develops a structural dynamic model of consumer demand for bank deposits. The model is estimated using yearly bank level data for all commercial banks in Massachusetts from 2001 to 2009. Results show that branching still affects market shares significantly, however, the impact is declining over the sample period. Chapter II analyzes consumer welfare in the banking industry. The purpose of the paper is to measure the impact of recent changes in bank characteristics on consumer welfare. Specifically, the goal is to examine how the increase in the number of branches and the decrease in the average distance of these branches to consumers have impacted consumer welfare. Average consumer welfare is found to be 4.2% higher in 2009 compared to 2001. Estimation of two counterfactuals reveals that both of the changes in bank characteristics have been beneficial to consumers. Chapter III focuses on the Yellow Pages advertising market. The goal of the study is to estimate how the extensive use of Internet has affected prices and market structure in the Yellow Pages advertising market. In contrast to most of the recent empirical literature, this paper considers the impact of Internet use on prices in addition to market structure. The main finding is that an increase in Internet use in a given directory's coverage area is associated with an increase in printed advertising prices and a decrease in the number of publishers.
Thesis (Ph.D.)--Boston University
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