Investigating the Monopoly Power in Iran's Banking Industry Using the Hypothesis Variable Approach (During the Period 1380 -1399)

Document Type : Research Paper


1 PhD student in Development Economics, Middle Branch, Islamic Azad University, Middle, Iran.

2 Assistant Professor, Department of Economics, Payame Noor University, Tehran, Iran

3 Assistant Professor, Department of Management, Middle Branch, Islamic Azad University, Middle, Iran


Economic experts always refer to competition as a solution for economic growth and optimal use of economic resources.Over the past two decades, significant policy changes have taken place in the banking system, especially in emerging market economies, which have affected competition.The main purpose of this study is to evaluate the market monopoly power of banks during the years 2001 to 2020 based on the approach of conjectural changes.To measure monopoly power, the generalized model of Azam and Lopez (2002) was used and the equations of supply and demand of loans were tested using panel data using a two-stage least squares method with fixed effects.In order to estimate the selected model, macroeconomic variables and balance sheet data of  33 banks from the country's banking network have been used during the years 2001 to 2020. The obtained results indicate that during the mentioned period, the elasticity of conjectural changes is equal to- 0/976 and the approach of the mentioned number to -1 indicates the competitiveness of the banking industry. On the other hand, the market monopoly power index was -0/0386 and the market monopoly power in the country's banking system and the behavior based on cooperation between banks has also decreased.On the other hand, the findings of the study confirm that the price elasticity of demand for facilities in the period was equal to -0/4 and the imposition of banking sanctions by inefficient alternative markets, has made it more and more, which indicates a more inelastic demand for bank facilities that increase The market power of the banking industry.


Main Subjects

  1. Ahmadian, A. (2014). Assessing the dynamics of Iran's banking industry with an emphasis on competitiveness. The 24th Annual Monetary and Exchange Policy Conference (in Persian).    
  2. Bananzhad, M. A. (2017). The role of branch network development in the intensity of competition in Iran's banking industry. Master's thesis in banking, Allameh Tabatabai University (in Persian).    
  3. Khodadad Kashi, F., Shahiki-tash, M. N., & Noorani Azad, S. (2014). Evaluation of mark-up, market power and cost efficiency in Iran's manufacturing industries. Iranian Economic and Applied Studies Quarterly, 3(12), 59-90 (in Persian).    
  4. Mahathanaseth, I., & Tauer, L. W. (2012). Market-power versus cost-efficiency in Thailand's banking sector in the post-crisis period (1998–2011). Journal of Asian Economics, 23(5), 499-506.‏
  5. Mirza, F. M., Bergland, O., & Khatoon, I. (2016). Measuring the degree of competition in Pakistan’s banking industry: an empirical analysis. Applied Economics, 48(53), 5138-5151.‏
  6. Misra, A. K., & Arrawatia, R. (2013). A conjectural variation approach for assessment of competition: a case on Indian commercial banks. Journal of Advances in Management Research.‏
  7. Moradi, M., Khodadad Kashi, F., Biabani, J., & Ghafari, H. (2015). Parametric measurement of the Lerner index in the loan and bank deposit market using the translog cost function. Economic Modeling Quarterly, 10(2), 1-27 (in Persian).    
  8. Pajzhoyan, Ja., & Shafiei, A. (2010). Analysis of structure in Iran's banking industry: Empirical application of Edivis index. Quarterly Journal of Quantitative Economics, 4, 81-105 (in Persian).    
  9. Shahiki-tash, M. N., & Hojjati, H. (2013). Measurement of elasticity of speculative changes and market power in selected industries of Iran. Quarterly Journal of Applied Economics Studies in Iran, 2(6), 85-103 (in Persian).    
  10. Shahiki-tash, M. N., Shidaei, Z., & Shivaei, E. (2014). Market power and cost efficiency in Iran's banking industry. Economic Modeling Research Quarterly, 16, 157-133 (in Persian).    
  11. Shahiki-tash, M. N., Qolipour, E., & Mohammadzadeh, A. (2015). Investigating market structure and market power of food and beverage industries based on Bresnahan and Leo's approach. Journal of Agricultural Economics and Development, 29(2), 204-215 (in Persian).    
  12. Shahiki-tash, M. N., & Mahmoudpour, K. (2015). Evaluating the market structure of bank deposits in Iran. Economic Modeling Quarterly, 9(3), 61-81 (in Persian).     
  13. Shamsian, Nasreen (2014). Privatization and its effect on the degree of competition in the country's banking system. master's thesis, Allameh Tabatabai University (in Persian).    
  14. Simbanegavi, W., Greenberg, J. B., & Gwatidzo, T. (2015). Testing for competition in the South African banking sector. Journal of African Economies, 24(3), 303-324.