An empirical test of the structure‐conduct‐performance paradigm in the Asian and Pacific basin countries

This paper tests the structure‐conduct‐performance paradigm in eighteen Asian and Pacific Basin countries. The results suggest that concentration in the banking markets in these countries lead to monopoly profits being earned and is a signal of collusive behaviour among the leading banks. Competitive imperfections allow banks to set prices that are less favourable to consumers thereby decreasing total consumer and producer surplus. This has important policy implications for merger activity. A further increase in concentration in the banking market in these countries will decrease the level of competition in the market. Regulatory actions, such as anti‐trust laws, are justified on efficiency grounds as well as for raising economic welfare.