We consider two agency-theory-based structural models and a reduced form model of bank inefficiency. The two structural models assume that the inefficiencies and quantities are sequentially and simultaneously determined, respectfully. The reduced form model assumes that inefficiency of a bank...

In a recent paper, Karadima and Louri use frontier-based measures of market power and bank competition in an application to Euro Area banking. The purpose of the present note is to access their paper in a critical way, as there are certain fallacies and errors.

In this reply, we provide detailed answers to the remarks made by Tsionas on the use of stochastic frontier-based measures of market power in a part of our empirical study, which examines the fragmentation and convergence dynamics of market power, concentration and credit risk in the euro area...