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Retail pricing of ATM network services

Author

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  • James J. McAndrews

Abstract

This paper develops a model of wholesale and retail fee-setting for automated teller machine (ATM) network services, and comparative statics results are derived. Retail ATM fees are shown to be dependent on the demand-side network effect and economies of scale in production of network services. These, in turn, are functions of the size of the ATM network. Survey data on bank fees are linked with the bank's probable ATM network membership, and the retail ATM fees are regressed on ATM network size and other variables in a reduced-form estimation. The results suggest that both network effects in demand and economies of scale influence retail ATM network service fees, with economies of scale becoming dominant for the largest ATM networks.

Suggested Citation

  • James J. McAndrews, 1996. "Retail pricing of ATM network services," Working Papers 96-12, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:96-12
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/1996/wp96-12.pdf
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    References listed on IDEAS

    as
    1. McAndrews, James J. & Rob, Rafael, 1996. "Shared ownership and pricing in a network switch," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 727-745, October.
    2. Matutes, Carmen & Padilla, A. Jorge, 1994. "Shared ATM networks and banking competition," European Economic Review, Elsevier, vol. 38(5), pages 1113-1138, May.
    3. Elizabeth Laderman, 1990. "The public policy implications of state laws pertaining to automated teller machines," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 43-58.
    4. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    5. James J. McAndrews, 1991. "The evolution of shared ATM networks," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-16.
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    Cited by:

    1. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Bank of Finland Research Discussion Papers 16/2003, Bank of Finland.
    2. Guibourg, Gabriela, 2001. "Interoperability and Network Externalities in Electronic Payments," Working Paper Series 126, Sveriges Riksbank (Central Bank of Sweden).
    3. Rochet Jean-Charles, 2003. "The Theory of Interchange Fees: A Synthesis of Recent Contributions," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-28, June.
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    5. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, University Library of Munich, Germany.
    6. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Research Discussion Papers 16/2003, Bank of Finland.

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