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Strategic Incompatibility in ATM Markets

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Abstract

We test whether firms use incompatibility strategically, using data from ATM markets. High ATM fees degrade the value of competitors’ deposit accounts, and can in principle serve as a mechanism for siphoning depositors away from competitors or for creating deposit account differentiation. Our empirical framework can empirically distinguish surcharging motivated by this strategic concern from surcharging that simply maximizes ATM profit considered as a standalone operation. The results are consistent with such behavior by large banks, but not by small banks. For large banks, the effect of incompatibility seems to operate through higher deposit account fees rather than increased deposit account base.

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File URL: http://www.netinst.org/Knittel-Stango_2006.pdf
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Paper provided by NET Institute in its series Working Papers with number 06-08.

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Length: 32 pages
Date of creation: Sep 2006
Date of revision: Sep 2006
Handle: RePEc:net:wpaper:0608
Contact details of provider: Web page: http://www.NETinst.org/

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Find related papers by JEL classification:
  • D2 - Microeconomics - - Production and Organizations
  • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
  • L6 - Industrial Organization - - Industry Studies: Manufacturing

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  1. 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.
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Cited by:

  1. Michal Grajek, 2003. "Estimating Network Effects and Compatibility in Mobile Telecommunications," CIG Working Papers SP II 2003-26, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  2. 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.
  3. Robin S. Lee, 2007. "Vertical Integration and Exclusivity in Two-Sided Markets," Working Papers 07-39, NET Institute, revised Aug 2012.
  4. Sobolewski, Maciej & Czajkowski, MikoŁaj, 2012. "Network effects and preference heterogeneity in the case of mobile telecommunications markets," Telecommunications Policy, Elsevier, vol. 36(3), pages 197-211.
  5. Grajek, Michal, 2010. "Estimating network effects and compatibility: Evidence from the Polish mobile market," Information Economics and Policy, Elsevier, vol. 22(2), pages 130-143, May.
  6. Miko?aj Czajkowski & Maciej Sobolewski, 2011. "Measuring network effects in mobile telecommunications markets with stated-preference valuation methods," International Journal of Management and Network Economics, Inderscience Enterprises Ltd, vol. 2(2), pages 197-215.

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