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Strategic Incompatibility in ATM Markets

32 Pages Posted: 23 Oct 2006  

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

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Date Written: October 2006

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 stand-alone 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.

Suggested Citation

Knittel, Christopher R. and Stango, Victor, Strategic Incompatibility in ATM Markets (October 2006). NBER Working Paper No. w12604. Available at SSRN: https://ssrn.com/abstract=938397

Christopher R. Knittel (Contact Author)

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

100 Main Street
E62-416
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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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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