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Atm Pricing And Location Games In The Retail Banking Industry

Listed author(s):


    (W.P. Carey School of Business, Arizona State University, AZ 85287, USA)



    (Paul Merage School of Business, University of California, Irvine, CA 92697, USA)



    (Guanghua School of Management, Peking University, Beijing 100871, China)

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    This paper studies a competitive Hotelling-style market with two symmetric banks that decide the pricing and location of their automated teller machines (ATMs). Two different systems are considered: An unregulated model wherein banks are allowed to set surcharges, and a regulated model in which surcharges are banned. We derive equilibrium outcomes and compare them in the two systems, and find that banks always maintain a certain distance between ATMs. That distance is larger, indeed maximized, under the regulatory scheme. We also show that, surprisingly, banks always perform better in the regulated model, while consumers may be worse off.

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    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Asia-Pacific Journal of Operational Research.

    Volume (Year): 29 (2012)
    Issue (Month): 01 ()
    Pages: 1-29

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    Handle: RePEc:wsi:apjorx:v:29:y:2012:i:01:p:1240001-1-1240001-29
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