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Abstract:
This paper explores various aspects of mergers and acquisitions in the banking industry within a simple model that allows explicit comparison of sector performance before and after the mergers and acquisitions. The model studies strategic interaction among commercial banks in an imperfectly competitive banking industry, and allows us to consider the determinants of the desirability as well as feasibility of mergers and acqusitions. The industry structure we look at involves a few dominant banks with a (competitive) fringe, which we take it as the structure most likely to resemble the Turkish banking industry in the aftermath of the ongoing restructuring process. Using a reasonable set of parameters to simulate the model, we do comparative statics exercises regarding the impact of mergers among domestic as well as with foreign banks on equilibrium
outcomes.
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