TY - JOUR
T1 - "Rip-off" ATM surcharges
AU - Massoud, Nadia
AU - Bernhardt, Dan
N1 - Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2002
Y1 - 2002
N2 - We develop a spatial model in which we endogenize both the pricing of ATM services by banks and the choice of home bank and ATM use by consumers. The equilibrium delivers the empirical regularities: Banks set high bank account fees for their own customers but do not charge them for ATM usage; in contrast, banks charge high ATM fees for nonmember users, fees that exceed those levels that would maximize ATM revenues from nonmembers; and larger banks set higher account fees and demand higher surcharges for ATM use than smaller banks. Paradoxically, (i) a bank's ATM revenues may fall short of its costs of ATM provision, and (ii) prohibiting banks from surcharging nonmembers, by forcing banks to charge members and nonmembers the same ATM price, leads to higher ATM prices, greater bank profits, and possibly reduced consumer welfare.
AB - We develop a spatial model in which we endogenize both the pricing of ATM services by banks and the choice of home bank and ATM use by consumers. The equilibrium delivers the empirical regularities: Banks set high bank account fees for their own customers but do not charge them for ATM usage; in contrast, banks charge high ATM fees for nonmember users, fees that exceed those levels that would maximize ATM revenues from nonmembers; and larger banks set higher account fees and demand higher surcharges for ATM use than smaller banks. Paradoxically, (i) a bank's ATM revenues may fall short of its costs of ATM provision, and (ii) prohibiting banks from surcharging nonmembers, by forcing banks to charge members and nonmembers the same ATM price, leads to higher ATM prices, greater bank profits, and possibly reduced consumer welfare.
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U2 - 10.2307/2696377
DO - 10.2307/2696377
M3 - Article
AN - SCOPUS:0036510056
SN - 0741-6261
VL - 33
SP - 96
EP - 115
JO - RAND Journal of Economics
JF - RAND Journal of Economics
IS - 1
ER -