The Welfare Consequences of ATM Surcharges: Evidence from a Structural Entry Model
We estimate a structural model of the market for automatic teller machines (ATMs) evaluate the implications of regulating ATM surcharges on ATM entry and consumer producer surplus. We estimate the model using data on firm and consumer locations, the parameters of the model by exploiting a source of local quasi–experimental variation, state of Iowa banned ATM surcharges during our sample period while the state of Minnesota not. We develop new econometric methods that allow us to estimate the parameters equilibrium models without computing equilibria. Monte Carlo evidence shows estimator performs well. We find that a ban on ATM surcharges reduces ATM entry percent, increases consumer welfare by about 10 percent and lowers producer profits percent. Total welfare remains about the same under regimes that permit or prohibit surcharges and is about 17 percent lower than the surplus maximizing level. This paper shed light on the theoretically ambiguous implications of free entry on consumer welfare for differentiated products industries in general and ATMs in particular.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- V. Joseph Hotz & Robert A. Miller, 1993. "Conditional Choice Probabilities and the Estimation of Dynamic Models," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 497-529.
- Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
- Christopher R. Knittel & Victor Stango, 2004.
"Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs,"
NBER Working Papers
10774, National Bureau of Economic Research, Inc.
- Christopher R. Knittel & Victor Stango, 2003. "Compatibility and pricing with indirect network effects: evidence from ATMs," Working Paper Series WP-03-33, Federal Reserve Bank of Chicago.
- Christopher Knittel & Victor Stango, 2005. "Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs," Working Papers 525, University of California, Davis, Department of Economics.
- Bresnahan, T.F & Reiss, P.C., 1989.
"Entry And Competition In Concentrated Markets,"
151, Stanford - Studies in Industry Economics.
- Chernew, Michael & Gowrisankaran, Gautam & Fendrick, A. Mark, 2002. "Payer type and the returns to bypass surgery: evidence from hospital entry behavior," Journal of Health Economics, Elsevier, vol. 21(3), pages 451-474, May.
- Kenneth Y. Chay & Michael Greenstone, 2003.
"The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 118(3), pages 1121-1167.
- Kenneth Y. Chay & Michael Greenstone, 1999. "The Impact of Air Pollution on Infant Mortality: Evidence from Geographic Variation in Pollution Shocks Induced by a Recession," NBER Working Papers 7442, National Bureau of Economic Research, Inc.
- Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
- Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
- Raphael Thomadsen, 2005. "The Effect of Ownership Structure on Prices in Geographically Differentiated Industries," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 908-929, Winter.
- Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007.
"Simple estimators for the parameters of discrete dynamic games (with entry/exit examples),"
RAND Journal of Economics,
RAND Corporation, vol. 38(2), pages 373-399, 06.
- Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Examples)," Harvard Institute of Economic Research Working Papers 2036, Harvard - Institute of Economic Research.
- Ariel Pakes & Michael Ostrovsky & Steve Berry, 2004. "Simple Estimators for the Parameters of Discrete Dynamic Games (with Entry/Exit Samples)," NBER Working Papers 10506, National Bureau of Economic Research, Inc.
- 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.
- Fumiko Hayashi & Richard J. Sullivan & Stuart E. Weiner, 2006. "A guide to the ATM and debit card industry - 2006 update," Monograph, Federal Reserve Bank of Kansas City, number 2006agttaadci2, April.
- Steven Berry & Joel Waldfogel, 1996.
"Free Entry and Social Inefficiency in Radio Broadcasting,"
NBER Working Papers
5528, National Bureau of Economic Research, Inc.
- Steven T. Berry & Joel Waldfogel, 1999. "Free Entry and Social Inefficiency in Radio Broadcasting," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 397-420, Autumn.
When requesting a correction, please mention this item's handle: RePEc:net:wpaper:0416. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nicholas Economides)
If references are entirely missing, you can add them using this form.