Cost efficiency and market power: A test of quiet life and related hypotheses in Indonesian banking industry

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

3 Citations (Scopus)

Abstract

This chapter investigates the relation between market power and cost efficiency (the quiet life hypothesis), and the two competing hypotheses of the relationship between market power and efficiency as well as market concentration on profitability (Structure Conduct Performance and Efficient Structure) in the Indonesian banking industry from 2002 to 2011. The estimation of efficiency is obtained by using a non-parametric Data Envelopment Analysis (DEA). To capture the equilibrium dynamic of the Indonesian banking industry, the Lerner index method is used to measure the level of competition. Results of this study failed to reject both Structure Conduct Performance hypothesis and Efficient Structure hypothesis, but disapprove the existence of the quiet life hypothesis in the Indonesian banking market.

Original languageEnglish
Title of host publicationInternational Series in Operations Research and Management Science
PublisherSpringer New York LLC
Pages167-190
Number of pages24
DOIs
Publication statusPublished - 2014

Publication series

NameInternational Series in Operations Research and Management Science
Volume215
ISSN (Print)0884-8289

Keywords

  • Cost efficiency
  • Efficient structure hypothesis
  • Managing service productivity
  • Market power
  • Quiet life hypothesis
  • Structure conduct performance hypothesis
  • X-efficiency

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