基于距离的反垄断市场定义算法

A Distance-based Algorithm for Defining AntitrustMarkets∗Charles Taragin†Marco Taylhardat‡2025-07-07AbstractWe propose a simple algorithm for defining merger-specific geographic antitrust mar-kets based on merging firm proximity.Applying it to over a thousand hypotheticalbank mergers, we compare concentration measures in our markets to those defined bythe Federal Reserve, which are not merger-specific, finding broad agreement but alsooffering potential improvements upon current definitions.Keywords:market definition; bank mergers; computational methodsJEL classification:G34, L40, C631IntroductionWe propose a simple algorithm for defining geographic antitrust markets and apply it toover a thousand hypothetical bank mergers.Our algorithm utilizes the distances betweenmerging parties’ branches to delineate markets.This approach is motivated by existingbanking literature, which emphasizes customers’ willingness to travel as a key factor in bankchoice.To demonstrate the utility of our approach, we simulate mergers between the two bankswith the largest total deposits in each Fed market within the lower 48 states. We excludeany merger that would result in a combined institution holding more than 10% of totalU.S. deposits, consistent with the national liabilities cap established by Federal ReserveRegulation XX (2025).For each eligible merger pair, we include every Fed market whereboth banks have branches and then algorithmically generate all overlapping distance-basedThe analysis and conclusions set forth are those of the authors and do not indicate concurrence by othermembers of the Board research staff or by the Federal Reserve Board of Governors. We thank Robert Adamsand Serafin Grundl for helpful comments.Federal Reserve Board. Corresponding author. 1801 K St NW #5830, Washington DC, 20006. charles.s.taragin@frb.govUniversity of Texas at Austin. marcotaylhardat.econ@gmail.com1 ∗†‡ markets. Finally, we identify all branches that are contained in each market and computeconcentration measures.Our analysis reveals broad agreement between Fed and distance-based markets.However,among the Fed markets that do not exceed the concentration thresholds, 25% contain atleast one distance-based market that exceeds the thresholds, indicating potential consumerharm in more localized areas. Additionally, among Fed markets that exceed the concentra-tion thresholds, 8% do not contain any distance-based markets that exceed the thresholds,suggesting that the broader market definitions may overstate competitive harm.The relevance of branch proximity to both depositors and small business borrowers is welldocumented.As far back asPhiladelphia(1963), there was witness testimony suggestingthat bank branches typically draw customers from 1.5 to 2 miles. Recent research continuesto underscore the importance of proximity in banking behavior. For instance, the medianconsumer in a Metropolitan Statistical Area resides within four miles of their nearest bankbranch (Benson et al. (2024)), and there is an 81% probability that a bank customer’shome is within five miles of their branch (Honka, Hortaçsu, and Vitorino (2017)).In thecontext of small business lending, half of all bank loans are made to firms located withinfour miles of the lending branch (Adams, Brevoort, and Driscoll (2023)).These patternssuggest that localized, community-based relationships remain central to banking, especiallyfor small businesses.2Current PracticeMultiple federal agencies, including the Federal Reserve, the U.S. Department of Justice, theOffice of the Comptroller of Currency, and the Federal Deposit Insurance Corporation aretasked with evaluating the competitive effects of bank mergers.We focus on the FederalReserve because its banking market definitions are publicly available.As illustrated in the BB&T-Suntrust merger Board Order (Board of Governors of the FederalReserve System (2019)), the Federal Reserve’s current procedures for identifying potentiallyharmful mergers involves two steps:First, the Federal Reserve defines relevant product and geographic markets. For the productmarket, the Federal Reserve follows the definition adopted inPhiladelphia(1963), whichtreats banking as a “cluster” of related products that includes commercial deposits, loansand other core banking services. To establish geographic markets, the Federal Reserve relieson Fed markets, which are predefined geographical areas created by the regional FederalReserve banks that are intended to “… reflect commercial and banking realities and shouldconsist of the local area where customers can practicably turn for alternatives.” (Board ofGovernors of the Federal Reserve System (2019))Second, the Federal Reserve assesses market concentration using the Herfindahl-HirschmanIndex (HHI), calculated from the deposit shares of branches within each Fed market.Amarket is flagged as “highly concentrated” if the post-merger HHI exceeds 1,800 and the2 merger increases HHI by more than 200 points, or if the me