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Strategic Incompatibility in ATM Markets

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Author Info
Christopher R. Knittel () (University of California, Davis)
Victor Stango () (Tuck School, Dartmouth)

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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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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

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  1. Christopher Knittel & Victor Stango, 2008. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 8(1), pages 1731-1731. [Downloadable!] (restricted)
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  2. Ferrari, S. & Verboven, F.L. & Degryse, H.A., 2007. "Investment and Usage of New Technologies: Evidence from a Shared ATM Network," Discussion Paper 2007-035, Tilburg University, Tilburg Law and Economic Center. [Downloadable!]
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