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Naive Consumers, Banking Competition, and ATM Pricing

Listed author(s):
  • Wenzel Tobias

    ()

    (Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), Universitätsstrasse 1, 40225 Düsseldorf, Germany)

This paper studies the performance of a direct charging regime in the ATM market in the presence of uninformed consumers who fail to recognize all relevant fees when selecting a bank. We show that the success of a direct charging regime critically depends on consumer information: the equilibrium surcharge fee is increasing in the number of uninformed consumers. If consumers are poorly informed, banking competition is weakened and prices for banking services are high. We discuss various regulatory interventions to improve market performance. We show that regulating the surcharge fee is an effective policy while intensifying competition (entry of additional banks or of independent service operators) fails to improve the outcome.

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File URL: https://www.degruyter.com/view/j/rne.2013.12.issue-3/rne-2012-0013/rne-2012-0013.xml?format=INT
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Article provided by De Gruyter in its journal Review of Network Economics.

Volume (Year): 12 (2013)
Issue (Month): 3 (October)
Pages: 271-286

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Handle: RePEc:bpj:rneart:v:12:y:2013:i:3:p:271-286:n:2
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  1. Spiegler, Ran, 2014. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780199334261.
  2. Donze, Jocelyn & Dubec, Isabelle, 2008. "Paying for ATM usage : good for consumers, bad for banks ?," MPRA Paper 10892, University Library of Munich, Germany.
  3. Jeffrey D. Shulman & Xianjun Geng, 2013. "Add-on Pricing by Asymmetric Firms," Management Science, INFORMS, vol. 59(4), pages 899-917, April.
  4. Donze Jocelyn & Dubec Isabelle, 2011. "ATM Direct Charging Reform: the Effect of Independent Deployers on Welfare," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-23, June.
  5. Spiegler, Ran, 2006. "Competition over agents with boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 1(2), pages 207-231, June.
  6. Ramón Faulí-Oller & Ioana Chioveanu & Joel Sandonís & Juana Santamaria-Garcia, 2007. "Atm Surcharges: Effects On Deployment And Welfare," Working Papers. Serie AD 2007-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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