Modelling service quality competition among banks in Singapore.

Abstract

In this paper, we model the banking competition in Singapore along the dimensions of service quality a consumer bank provides. Our research follows the model put forth by Jackson, Nandakumar and Roth in the paper, “Market structure, Consumer Banking, and Optimal Level of Service Quality.” According to Jackson et al, banks which are interacting in markets with low demand interaction (b) would differ greatly in the optimal level of service quality, thus showing a wide spread across banks. A correlation analysis for each of the consumer banks’ deposit and loan markets was used to determine the value of b. In Singapore, b took on a low value. To test this finding, we conducted a survey to determine if there exists a larger spread for banks in markets of low b and high l. In general, we find that our results support the Jackson et al.’s model to a large degree.