How Does Incompatibility Affect Prices?: Evidence from ATM's

26 Pages Posted: 13 Oct 2009

See all articles by Christopher R. Knittel

Christopher R. Knittel

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Victor Stango

UC Davis Graduate School of Management

Abstract

If consumers value ‘mix and match’ combinations of network complements, incompatibility between different sellers' components should affect prices. In ATM markets, a 1996 governance change exogenously generated such incompatibility, by allowing banks to impose surcharges when other banks' deposit customers use their ATM's. In our data, incompatibility makes the relationship between deposit account pricing and own ATM's more positive, and makes the relationship between deposit account pricing and competitors ATM's more negative. The level effect on prices is positive. The pattern of results is more pronounced in high population density markets, where customers may care more about ATM's.

Suggested Citation

Knittel, Christopher R. and Stango, Victor, How Does Incompatibility Affect Prices?: Evidence from ATM's. The Journal of Industrial Economics, Vol. 57, Issue 3, pp. 557-582, September 2009. Available at SSRN: https://ssrn.com/abstract=1486866 or http://dx.doi.org/10.1111/j.1467-6451.2009.00387.x

Christopher R. Knittel (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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National Bureau of Economic Research (NBER)

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Victor Stango

UC Davis Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

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