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Strategic Incompatibility in ATM Markets

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  • Christopher R. Knittel
  • Victor Stango

Abstract

We test whether firms use incompatibility strategically, using data from ATM markets. High ATM fees degrade the value of competitors' deposit accounts, and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation. Our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes ATM profit considered as a stand-alone operation. The results are consistent with such behavior by large banks, but not by small banks. For large banks, the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12604.

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Date of creation: Oct 2006
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Publication status: published as Knittel, Christopher and Victor Stango. "Strategic Incompatibility in ATM Markets." Journal of Banking and Finance. Volume 35, Issue 10, October 2011, Pages 2627-2636.
Handle: RePEc:nbr:nberwo:12604

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Cited by:
  1. Ferrari, S. & Verboven, F.L. & Degryse, H.A., 2008. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," Discussion Paper, Tilburg University, Center for Economic Research 2008-1, Tilburg University, Center for Economic Research.
  2. Michal Grajek, 2003. "Estimating Network Effects and Compatibility in Mobile Telecommunications," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) SP II 2003-26, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  3. Czajkowski, Mikolaj & Sobolewski, Maciej, 2010. "Measuring Network Effects in Mobile Telecommunications Markets with Stated‐Preference Valuation Methods," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation, International Telecommunications Society (ITS) 5, International Telecommunications Society (ITS).
  4. Grajek, Michal, 2010. "Estimating network effects and compatibility: Evidence from the Polish mobile market," Information Economics and Policy, Elsevier, Elsevier, vol. 22(2), pages 130-143, May.
  5. Donze, Jocelyn & Dubec, Isabelle, 2009. "ATM Direct Charging Reform: the Effect of Independent Deployers on welfare," MPRA Paper 15818, University Library of Munich, Germany.
  6. Robin S. Lee, 2007. "Vertical Integration and Exclusivity in Two-Sided Markets," Working Papers, NET Institute 07-39, NET Institute, revised Aug 2012.

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