Cost Efficiencies of Mergence of Taiwan's Banking Firms as Multiproduct Oligopolies

Abstract

The purpose of this research is to explore the cost efficiencies of mergence of Taiwan's banking firms as Multiproduct Oligopolies. Under the assumption of profit maximization, this research derives the first-order conditions for each banking firm by choosing two output quantities. Those optimal conditions together with the cost function and share equations form the system of five regression equations that is applied to estimate the cost function of Taiwan's Banking Firms. In view of technical efficiency and different cost structures, this research uses the Thick Frontier Approach (TFA) to simulate the cost efficiencies of mergence. First, the all banking firms are classified into four groups, and then uses the system of five regression equations to estimate the cost function and cost efficiencies of mergence.