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The role of the interchange fee on the effect of forbidding price discrimination of ATM services

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  • Ramón Faulí-Oller

    ()
    (Universidad de Alicante)

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    Abstract

    We consider whether banks should be allowed to set different ATM prices to their customers depending on whether they hold an account on the bank. In Massoud and Bernhardt (2002), without considering an interchange fee, a ban on price discrimination on ATM services increases total surplus. In the present model that considers an interchange fee, the effect of a ban on price discrimination depends on the way the interchange is fixed. If it is fixed to maximize the profits of banks, forbidding price discrimination reduces total surplus. However, if the interchange is fixed to maximize total surplus, banning price discrimination increases total surplus.

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2008-03.pdf
    File Function: Fisrt version / Primera version, 2008
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    Bibliographic Info

    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2008-03.

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    Length: 12 pages
    Date of creation: Mar 2008
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasad:2008-03

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    Related research

    Keywords: ATM; surcharge; foreign fee; interchange fee; collusion.;

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