Conduct in a banking monopoly

Extending previous empirical work on concentrated markets, this paper applies a Rosse-Panzar revenue test to quarterly data from a monopoly bank. The test rejects the hypotheses of static monopoly pricing or perfectly contestable pricing. Other tests suggest that the bank was in long-run equilibrium during the sample period and did not exhibit particular forms of expense-preference behavior. Possible interpretations of the bank's conduct include limit pricing to deter entry or an objective other than maximizing static profit. The results raise new questions about conduct among monopoly banks or in declining markets.