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Product Innovation and Network Survival in the U.S. ATM and Debit Card Industry

  • Zhu Wang

    (Federal Reserve Bank of Kansas City)

  • Fumiko Hayashi

    (Federal Reserve Bank of Kansas City)

This paper provides a model to explain the shakeout of the U.S. ATM and debit card industry, which emphasizes the role that a major product innovation â introducing the debit function in the mid 1980s â played in driving the network consolidation. Consistent with the theory, our empirical findings show that large networks had a better chance of adopting the debit innovation and surviving the shakeout. However, in contrast to previous studies, we find little advantage of being an early entrant in this network industry. Rather, ownership and organizational structure had an important influence on network size and survival.

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File URL: https://www.economicdynamics.org/meetpapers/2011/paper_725.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 725.

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Date of creation: 2011
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Handle: RePEc:red:sed011:725
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Web page: http://www.EconomicDynamics.org/society.htm
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  1. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-34, May.
  2. Christopher Knittel & Victor Stango, 2005. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," Working Papers 532, University of California, Davis, Department of Economics.
  3. 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.
  4. repec:rje:randje:v:37:y:2006:3:p:692-719 is not listed on IDEAS
  5. Fumiko Hayashi & Rick 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.
  6. Steven Klepper & Elizabeth Graddy, 1990. "The Evolution of New Industries and the Determinants of Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 27-44, Spring.
  7. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  8. Zhu Wang, 2008. "Income Distribution, Market Size and the Evolution of Industry," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 542-565, July.
  9. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  10. Zhu Wang, 2007. "Technological Innovation and Market Turbulence: The Dot-com Experience," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(1), pages 78-105, January.
  11. Klepper, Steven & Simons, Kenneth L., 2005. "Industry shakeouts and technological change," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 23-43, February.
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