Abstract

http://ssrn.com/abstract=899460
 
 

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Endogenous ATM Networks and Pricing


Dan Bernhardt


University of Illinois at Urbana-Champaign - Department of Economics

Nadia Massoud


York University - Schulich School of Business

July 24, 2005


Abstract:     
We develop a novel spatial model in which we endogenize the choice by banks of both (i) how to price banking services, and (ii) how many ATMs to provide. The feature of the spatial model that makes it possible to solve for equilibrium pricing and location choices is that consumers receive bank-specific location shocks. Consistent with the recent proliferation of ATMs and findings in the empirical literature, we find that in equilibrium, banks over-provide ATMs. Banks do so because they extract profits more efficiently from bank members through bank account fees than from ATM use by members (depositors) of other banks,and a more developed ATM network raises the attraction of establishing an account with the bank. Surprisingly,over-provision of ATMs rises when the ATM network choice is made prior to pricing decisions.

Number of Pages in PDF File: 32

Keywords: ATMs, ATM surcharges, ATM network , Retail payment system

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Date posted: May 7, 2006  

Suggested Citation

Bernhardt, Dan and Massoud, Nadia, Endogenous ATM Networks and Pricing (July 24, 2005). Available at SSRN: http://ssrn.com/abstract=899460 or http://dx.doi.org/10.2139/ssrn.899460

Contact Information

Dan Bernhardt
University of Illinois at Urbana-Champaign - Department of Economics ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
217-244-5708 (Phone)
Nadia Massoud (Contact Author)
York University - Schulich School of Business ( email )
4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
HOME PAGE: http://www.schulich.yorku.ca/SSB-Extra/Faculty.nsf/faculty/Massoud+Nadia
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