Measuring Market Power in the Iranian Banking Industry According to the Boone Efficient-based Approach

The main objective of this paper is to evaluate the structure of the Iranian banking system and to measure the market power factor based on the Boone approach. In this paper, we investigated the Iranian organized money market, including ۱۸ banks operating in the period of ۲۰۰۸-۲۰۱۵. To calculate the marginal cost (MC), we used a Translog Stochastic Frontier Cost Function. Findings based on the Boone approach confirm that the size of efficient-based competition is low in Iranian organized money market. Based on the Boone index, this value in the Iranian banking market equals -۰.۰۲۲, and Bank Melli and Bank Mellat due to having high marginal cost elasticity with respect to market share, have a higher power in market transformations and distortion of market structure towards monopoly. In contrast, Karafarin Bank, Post Bank, Sarmayeh, and Sina Bank have produced the least distortion in market structure.

Keywords:

Banks , Boone Approach , Degree of Competition , Elasticity Factor