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Competition Through Innovation: ATMs in Italian Banks

  • Hester Donald D.
  • Calcagnini Giorgio
  • De Bonis Riccardo

This paper reports results from a study of location, ownership, and acquisitions of automated teller machines (ATMs) by a sample of large Italian banks between 1991 and 1995. The sample banks had 85% of Italian banking assets. Data are collected at the provincial level for each bank. The underlying model is recursive; a bank is presumed to make branching decisions (analyzed in a separate paper) and then, conditional on branching decisions, decisions about ATMs. Several sets of cross-sectional data are studied using OLS and Tobit models yielding the following results: 1) The logarithm of ATMs in a province is related positively to the logarithms of interest-bearing deposits and GDP and negatively to the logarithm of population, as was predicted from a variation of Baumol's transactions demand for cash model; 2) The number of a bank's ATMs in a province is related positively to the numbers of its branches and deposit accounts, a province's per capita GDP, the bank's deposits, and the bank's number of employees per branch in the province and negatively to the bank's share of a province's branches; 3) Changes in a bank's ATMs in a province are positively related to changes in the number of its branches and those of competitors; and 4) Concentration indices of ATMs, branches, deposits, and loans decreased at the provincial level between 1991 and 1995.

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Article provided by Società editrice il Mulino in its journal Rivista italiana degli economisti.

Volume (Year): (2001)
Issue (Month): 3 ()
Pages: 359-382

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Handle: RePEc:mul:jqat1f:doi:10.1427/3699:y:2001:i:3:p:359-382
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  1. Timothy H. Hannan & John M. McDowell, 1984. "The Determinants of Technology Adoption: The Case of the Banking Firm," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 328-335, Autumn.
  2. Paul S. Calem & Leonard I. Nakamura, 1998. "Branch Banking And The Geography Of Bank Pricing," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 600-610, November.
  3. James J. McAndrews, 1991. "The evolution of shared ATM networks," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-16.
  4. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August.
  5. Matutes, Carmen & Padilla, A. Jorge, 1994. "Shared ATM networks and banking competition," European Economic Review, Elsevier, vol. 38(5), pages 1113-1138, May.
  6. Garth Saloner & Andrea Shepard, 1995. "Adoption of Technologies with Network Effects: An Empirical Examination of the Adoption of Teller Machines," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 479-501, Autumn.
  7. Calcagnini,G. & Bonis,R. de & Hester,D.D., 1999. "Determinants of bank branche expension in Italy," Working papers 32, Wisconsin Madison - Social Systems.
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