Competition in the Norwegian Mortgage Market: Use of Diversion Ratios to Investigate the Competitive Proximity between DNB and Sparebanken Vest
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- Master Thesis 
In this thesis, we use an empirical approach to investigate which implications a potential merger between DNB and Sparebanken Vest will have on the competitive situation in the mortgage market and if there are any distinctions in the answers and diversion ratios between marginal, non-marginal, and average customers. We conduct a survey on a sample of residents in Bergen with a mortgage in DNB or Sparebanken Vest. We find that a potential merger will cause an upward pricing pressure and an increased market concentration which raises competition concerns. The diversion ratios between the banks are relatively high. However, from the critical loss analysis, we find that the banks not will benefit from a price increase, which indicates that they not are close competitors and that it is not likely that a merger will cause anticompetitive behavior. Moreover, we find that there are distinctions between marginal, non-marginal and average customers. Our findings indicate that marginal customers are more active in the banking market and take more advantage of the competition. In addition, we find that the estimated marginal and non-marginal diversion ratios from DNB to Sparebanken Vest differ significantly. This indicates that when the competition authorities assess mergers, they should not assume that all customers have the same responses and are non-marginal, as this may lead to a wrong conclusion.