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Atm Pricing And Location Games In The Retail Banking Industry

Author

Listed:
  • REYNOLD BYERS

    (W.P. Carey School of Business, Arizona State University, AZ 85287, USA)

  • SHUYA YIN

    (Paul Merage School of Business, University of California, Irvine, CA 92697, USA)

  • XIAONA ZHENG

    (Guanghua School of Management, Peking University, Beijing 100871, China)

Abstract

This paper studies a competitive Hotelling-style market with two symmetric banks that decide the pricing and location of their automated teller machines (ATMs). Two different systems are considered: An unregulated model wherein banks are allowed to set surcharges, and a regulated model in which surcharges are banned. We derive equilibrium outcomes and compare them in the two systems, and find that banks always maintain a certain distance between ATMs. That distance is larger, indeed maximized, under the regulatory scheme. We also show that, surprisingly, banks always perform better in the regulated model, while consumers may be worse off.

Suggested Citation

  • Reynold Byers & Shuya Yin & Xiaona Zheng, 2012. "Atm Pricing And Location Games In The Retail Banking Industry," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(01), pages 1-29.
    • Handle: RePEc:wsi:apjorx:v:29:y:2012:i:01:n:s0217595912400015
    DOI: 10.1142/S0217595912400015
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    References listed on IDEAS

    as
    1. Knittel Christopher R. & Stango Victor, 2008. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-42, January.
    2. Gautam Gowrisankaran & John Krainer, 2004. "The welfare consequences of ATM surcharges: evidence from a structural entry model," Working Paper Series 2005-01, Federal Reserve Bank of San Francisco.
    3. Gautam Gowrisankaran & John Krainer, 2005. "Bank ATMs and ATM surcharges," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue dec16.
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    Citations

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    Cited by:

    1. Farhad Etebari, 2020. "Pricing Competition Under Specific Discrete Choice Models," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 37(02), pages 1-14, March.
    2. Derya Celik Turkoglu & Mujde Erol Genevois, 2020. "A comparative survey of service facility location problems," Annals of Operations Research, Springer, vol. 292(1), pages 399-468, September.

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