Competition before Sunset: The Case of the Finnish ATM Market

Review of Network Economics Volume 13, Issue 1, 2014: 1–33

Bank of Finland Research Discussion Paper No. 32/2012

34 Pages Posted: 10 Nov 2012 Last revised: 11 Feb 2015

Maria Kopsakangas-Savolainen

Finnish Environment Institute; University of Oulu - Department of Economics; Thule Institute

Tuomas Takalo

Hanken School of Economics - Department of Economics; Helsinki Center of Economic Research (HECER)

Date Written: November 6, 2012

Abstract

We build a simple model to study service fee competition between an incumbent and an independent ATM deployer, and its optimal regulation. We use the model to analyze an actual regulation of such a market by competition authorities in Finland. We find that socially optimal first-best fees would imply negative profits for the independent deployer, calling for a Ramsey regulation. While the Finnish regulation pushes the foreign fee downwards towards its socially optimal level, the regulated fees are likely to remain too high from the welfare point of view. In contrast with the actual regulation, it would be essential to regulate the independent deployer's interchange fee, as the incumbent deployer internalizes the effect of its foreign fee on consumer usage of the rival's network and has little incentive for foreclosure.

Keywords: ATM industry, regulation, competition policy, cash availability, retail payments

JEL Classification: L41, L51, L13, K21, G23

Suggested Citation

Kopsakangas-Savolainen, Maria and Takalo, Tuomas, Competition before Sunset: The Case of the Finnish ATM Market (November 6, 2012). Review of Network Economics Volume 13, Issue 1, 2014: 1–33 ; Bank of Finland Research Discussion Paper No. 32/2012. Available at SSRN: https://ssrn.com/abstract=2173252 or http://dx.doi.org/10.2139/ssrn.2173252

Maria Kopsakangas-Savolainen

Finnish Environment Institute ( email )

PO Box 413
Oulu, 90014
Finland

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Thule Institute ( email )

Oulu
Finland

Tuomas Takalo (Contact Author)

Hanken School of Economics - Department of Economics ( email )

PO Box 479
FI-00101 Helsinki
Finland

HOME PAGE: http://https://sites.google.com/site/tuomastakalo/

Helsinki Center of Economic Research (HECER) ( email )

FI-00014 Helsinki
Finland

HOME PAGE: http://https://sites.google.com/site/tuomastakalo/

Paper statistics

Downloads
34
Abstract Views
388