Fieldwork Regarding Economics of Scale and Economies of Density: The Case of a Regional Bank

Abstract

The objective of this research is to perform a comparative study regarding economics of scale and economies of density based on the case of a regional bank. In some researches regarding regional banks, the merger and expansion of service areas is suggested by reason of the economics of scale. In these re- searches, however the advantages of mergers and area expansion are not veri- fied from the viewpoint of economies of density, nor do they consider the risks of mergers. In this research, the economic efficiency of a regional bank was simu- lated from the viewpoint of economics of scale and economies of density. The decision-making problem of the bank was to compare a narrow area that has high-density economic efficiency with the economic efficiency of a merger and area expansion. The real option of the bank was analysed by the Monte Carlo simulation method, and a desirable alternative plan was indicated accordingly.