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Fees and Surcharging in automatic teller machine networks: Non-bank ATM providers versus large banks

Author

Listed:
  • Elizabeth W. Croft
  • Barbara J. Spencer

Abstract

This paper develops a spacial model of ATM networks to explore the implications for banks and non-banks of interchange fees, foreign fees and surcharges applied to transactions by customers at other than an own-bank ATM. Surcharging raises the price (foreign fee plus surcharge) paid by customers above the joint profit-maximizing level achieved by setting the interchange fee at marginal cost and not surcharging. Similar size banks would agree not to surcharge, but such an agreement is typically not possible between a bank and a non-bank. A high cost of teller transactions modifies the tendency towards high ATM fees.

Suggested Citation

  • Elizabeth W. Croft & Barbara J. Spencer, 2003. "Fees and Surcharging in automatic teller machine networks: Non-bank ATM providers versus large banks," NBER Working Papers 9883, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9883 Note: IO
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    References listed on IDEAS

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    1. Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-123, March.
    2. James J. McAndrews, 1998. "ATM surcharges," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Apr).
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    Cited by:

    1. Gautam Gowrisankaran & John Krainer, 2004. "The welfare consequences of ATM surcharges: evidence from a structural entry model," Working Paper Series 2005-01, Federal Reserve Bank of San Francisco.
    2. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Scientific Monographs, Bank of Finland, number 2006_038, November.
    3. 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.

    More about this item

    JEL classification:

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

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