The Potential Impact of Foreign Entry on Domestic Competition

The 1988 Price Waterhouse study employs the assumption that as barriers to foreign entry are reduced, domestic markets will become more competitive due to the threat of potential or actual foreign entry. I first develop some theoretical notions about the potential impact of cross-border entry on domestic market structure, conduct and performance in retail financial services in the first section. The second section then presents empirical data on the possible and actual effect of cross-border entry and discusses the extent and possible reasons for price differences of financial products across EC markets.