The role of the interchange fee on the effect of forbidding price discrimination of ATM services
AbstractWe 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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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2008-03.
Length: 12 pages
Date of creation: Mar 2008
Date of revision:
Publication status: Published by Ivie
ATM; surcharge; foreign fee; interchange fee; collusion.;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-20 (All new papers)
- NEP-BAN-2008-07-20 (Banking)
- NEP-COM-2008-07-20 (Industrial Competition)
- NEP-MIC-2008-07-20 (Microeconomics)
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