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Paying for ATM usage : good for consumers, bad for banks ?

  • Donze, Jocelyn
  • Dubec, Isabelle

We compare the effects of the three most common ATM pricing regimes on consumers’ welfare and banks’ profits. We consider cases where the ATM usage is free, where customers pay a foreign fee to their bank and where they pay a foreign fee and a surcharge. Paradoxically, when banks set an additional fee profits are decreased. Besides, consumers’ welfare is higher when ATM usage is not free. Surcharges enhance ATM deployment so that consumers prefer paying surcharges when reaching cash is costly. Our results also shed light on the Australian reform that consists in removing the interchange fee.

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File URL: http://mpra.ub.uni-muenchen.de/10892/1/MPRA_paper_10892.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10892.

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Date of creation: 16 Sep 2008
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Handle: RePEc:pra:mprapa:10892
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  1. Knittel, Christopher R., 2004. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," Santa Cruz Department of Economics, Working Paper Series qt4z54r2s3, Department of Economics, UC Santa Cruz.
  2. Christopher R. Knittel & Victor Stango, 2009. "HOW DOES INCOMPATIBILITY AFFECT PRICES?: EVIDENCE FROM ATM'S -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 557-582, 09.
  3. 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.
  4. James J. McAndrews, 1998. "ATM surcharges," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 4(Apr).
  5. 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.
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