Abstract
We analyze a unique dataset to test an empirical model of retail bank fee determinants in five Central European countries. Due to the data structure we can cope with heterogeneity and cross-subsidization by employing a representative customer fee index instead of using variables associated with individual fees.
We find support for the Structure-Conduct-Performance hypothesis about i) the effect of industry concentration on the relative size of a bank?s fees, ii) the importance of differences in reliance on cashless payments, and iii) differences in the labor intensity and technology level of a bank?s operations on the bank?s pricing decision. Overall, we also show that the cross-country differences in retail bank fees can be explained by fundamental economic factors.