Participation against competition in banking markets based on cooperative game theory

Abstract

The issue of increasing profit and reducing operational costs is the most important subject in banking management. One of the ways to solve this problem, is the cooperation (coalition) of banks together in order to reduce costs and simultaneously increase the operating profit. To solve this problem, in the present research, a model is presented for the participation of banks using game theory with which the banks can cooperate to achieve higher profits while providing their services. The model obtained from game theory is used in four private banks. The results indicate that the profit of banks is higher with coalition than acting alone in the market and it would continue with the increasing demand and the presence of more banks. Pearson correlation coefficient indicates that the results of the model match the views of banking experts. This may strengthen the principle of “participation” against “competition” in the banking industry.