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ATM surcharge bans and bank market structure: The case of Iowa and its neighbors

  • Hannan, Timothy H.

It is frequently claimed that high ATM surcharges actually attract customers to the banks that impose them, particularly if they operate large ATM networks. By exploiting as "natural experiments" two events associated with the lifting of surcharge bans in Iowa and in the states that neighbor Iowa, this paper seeks to test for the implications of this phenomenon as it applies to the market shares of banking institutions and to several aspects of market structure. Consistent with these implications, results of "difference-in-difference" analyses suggest that the shares of larger market participants increase, the shares of smaller market participants decrease, market concentration increases, and the number of market competitors decreases after the lifting of surcharge bans.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 31 (2007)
Issue (Month): 4 (April)
Pages: 1061-1082

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Handle: RePEc:eee:jbfina:v:31:y:2007:i:4:p:1061-1082
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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  1. Knittel Christopher R. & Stango Victor, 2008. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-42, January.
  2. Berger, Allen N & Hannan, Timothy H, 1989. "The Price-Concentration Relationship in Banking," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 291-99, May.
  3. Timothy H. Hannan & Robin A. Prager, 2001. "The competitive implications of multimarket bank branching," Finance and Economics Discussion Series 2001-43, Board of Governors of the Federal Reserve System (U.S.).
  4. Gautam Gowrisankaran & John Krainer, 2006. "The Welfare Consequences of ATM Surcharges: Evidence from a Structural Entry Model," NBER Working Papers 12443, National Bureau of Economic Research, Inc.
  5. Paul S. Calem & Gerald A. Carlino, 1989. "The concentration/conduct relationship in bank deposit markets," Working Papers 89-26, Federal Reserve Bank of Philadelphia.
  6. Hannan, Timothy H., 2006. "Retail deposit fees and multimarket banking," Journal of Banking & Finance, Elsevier, vol. 30(9), pages 2561-2578, September.
  7. Timothy H. Hannan & Elizabeth K. Kiser & Robin A. Prager & James J. McAndrews, 2003. "To Surcharge or Not to Surcharge: An Empirical Investigation of ATM Pricing," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 990-1002, November.
  8. Christopher R. Knittel & Victor Stango, 2003. "Compatibility and pricing with indirect network effects: evidence from ATMs," Working Paper Series WP-03-33, Federal Reserve Bank of Chicago.
  9. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  10. Astrid A. Dick, 2002. "Demand estimation and consumer welfare in the banking industry," Finance and Economics Discussion Series 2002-58, Board of Governors of the Federal Reserve System (U.S.).
  11. Robert M. Adams & Kenneth P. Brevoort & Elizabeth K. Kiser, 2005. "Who competes with whom? the case of depository institutions," Finance and Economics Discussion Series 2005-03, Board of Governors of the Federal Reserve System (U.S.).
  12. Robin Prager, 2001. "The Effects of ATM Surcharges on Small Banking Organizations," Review of Industrial Organization, Springer, vol. 18(2), pages 161-173, March.
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