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Atm Surcharges: Effects On Deployment And Welfare

Author

Listed:
  • Ramón Faulí-Oller

    () (Universidad de Alicante)

  • Ioana Chioveanu

    () (Universidad de Alicante)

  • Joel Sandonís

    () (Universidad de Alicante)

  • Juana Santamaria-Garcia

    () (Universidad de Alicante)

Abstract

This paper analyzes the effects of ATM surcharges on deployment and welfare, in a model where banks compete for ATM and banking services. Foreign fees, surcharges and the interchange fee are endogenously determined. We find that, when the interchange fee is cooperatively fixed by banks to maximize joint profits, surcharges should be allowed, as they neutralize the collusive effect of the interchange fee. As a consequence, ATM deployment is higher and retail prices lower than without surcharges, increasing consumer surplus and social welfare.

Suggested Citation

  • 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).
  • Handle: RePEc:ivi:wpasad:2007-12
    as

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    References listed on IDEAS

    as
    1. Nadia Massoud & Anthony Saunders & Barry Scholnick, 2006. "The Impact of ATM Surcharges on Large versus Small Banks: Is There a Switching Effect?," The Journal of Business, University of Chicago Press, vol. 79(4), pages 2099-2126, July.
    2. 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.
    3. Nadia Massoud & Dan Bernhardt, 2002. ""Rip-Off" ATM Surcharges," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 96-115, Spring.
    4. Christopher R. Knittel & Victor Stango, 2009. "How Does Incompatibility Affect Prices?: Evidence From Atm'S," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 557-582, September.
    5. 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.
    6. Mcandrews James J., 2003. "Automated Teller Machine Network Pricing - A Review of the Literature," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-13, June.
    7. Knittel, Christopher R. & Stango, Victor, 2011. "Strategic incompatibility in ATM markets," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2627-2636, October.
    8. Hannan, Timothy H., 2007. "ATM surcharge bans and bank market structure: The case of Iowa and its neighbors," Journal of Banking & Finance, Elsevier, vol. 31(4), pages 1061-1082, April.
    9. Hannan Timothy H. & Borzekowski Ron, 2007. "Incompatibility and Investment in ATM Networks," Review of Network Economics, De Gruyter, vol. 6(1), pages 1-15, March.
    10. Matutes, Carmen & Padilla, A. Jorge, 1994. "Shared ATM networks and banking competition," European Economic Review, Elsevier, vol. 38(5), pages 1113-1138, May.
    11. Donze, Jocelyn & Dubec, Isabelle, 2006. "The role of interchange fees in ATM networks," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 29-43, January.
    12. Ioana Chioveanu & Ramon Fauli‐Oller & Joel Sandonis & Juana Santamaria, 2009. "Atm Surcharges: Effects On Deployment And Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 613-635, September.
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    Citations

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    Cited by:

    1. 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.
    2. Stijn Ferrari & Frank Verboven & Hans Degryse, 2010. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," American Economic Review, American Economic Association, vol. 100(3), pages 1046-1079, June.
    3. Stijn Ferrari, 2010. "Discriminatory fees, coordination and investment in shared ATM networks," Working Paper Research 184, National Bank of Belgium.
    4. Tobias Wenzel, 2014. "Independent Service Operators in ATM Markets," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 26-47, February.
    5. Ioana Chioveanu & Ramon Fauli‐Oller & Joel Sandonis & Juana Santamaria, 2009. "Atm Surcharges: Effects On Deployment And Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 613-635, September.
    6. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    7. Wenzel Tobias, 2013. "Naive Consumers, Banking Competition, and ATM Pricing," Review of Network Economics, De Gruyter, vol. 12(3), pages 271-286, October.
    8. Jakub Górka, 2011. "Rozwój sieci bankomatów w Polsce a opłaty interchange i surchange," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 7-8, pages 89-112.
    9. Stijn Ferrari & Frank Verboven & Hans Degryse, 2010. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," American Economic Review, American Economic Association, vol. 100(3), pages 1046-1079, June.
    10. Pedro I. González Ramírez & Leobardo Plata Pérez, 2015. "Análisis teórico de las modificaciones a la regulación de comisiones interbancarias en cajeros automáticos en México," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 30(1), pages 141-178.

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    More about this item

    Keywords

    ATM; surcharge; foreign fee; interchange fee; collusion;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G2 - Financial Economics - - Financial Institutions and Services

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