Multimarket Contact And Competitive Intensity

The company’s repeated encounters with the same adversary in different markets are defined as multimarket contact(MMC).Research shows that multimarket contacts can promote implicit collusion by increasing mutual familiarity and deterrence,which increases the possibility of mutual restraint and reduces the intensity of competition.On the one hand,companies frequently meet in multiple markets,and this kind of outof-market contact increases the scope and frequency of contact;On the other hand,companies that frequently meet in the market also have varying degrees of overlap due to the number of branches,and this kind of in-market contact deepens the intensity and degree of contact.This article explores the influence of out-of-market contacts and intra-market contacts on the intensity of competition caused by multimarket contact in China’s wealth management product market,and discusses whether the two kinds of contacts can lead to mutual restraint between banks.This article uses the "non-national issuance" wealth management products issued by state-owned banks,joint-stock banks and city commercial banks during 2011-2018 as samples,and uses prefecture-level cities as the market to explore the relationship between multimarket contact and wealth management products’ issuance interest rates.Results show that the influence of intra-market and out-of-market contacts on the intensity of competition caused by multi-market contacts is opposite.In China,wealth management product market has not formed mutual restraint under the increasingly frequent market contacts between banks in the external market,and then caused higher interest rates and competition intensity.However,the closer market contact caused by the number of branches within the market has led to a decline in product interest rates and competition intensity,confirming the hypothesis of mutual restraint.In addition,this article also carried out sub-sample discussions for different bank types in different periods,and the results also showed certain differences.Specifically,state-owned banks and joint-stock banks could only increase the contact inside the market to reduce the intensity of competition,while joint-stock banks can form mutual restraint by increasing the multimarket contact inside and outside the market to reduce the intensity of competition.