Template-Type: ReDIF-Paper 1.0
Author-Name: Christopher Knittel
Author-Name-First: Christopher
Author-Name-Last: Knittel
Author-Name: Victor Stango
Author-Name-First: Victor
Author-Name-Last: Stango
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs
Abstract: Incompatibility in markets with indirect network e¤ects can a¤ect prices if consumers value?mix and match?combinations of complementary network components. In this paper, we exam-ine the e¤ects of incompatibility using data from a classic market with indirect network e¤ects:Automated Teller Machines (ATMs). Our sample covers a period during which higher ATMfees increased incompatibility between ATM cards (which are bundled with deposit accounts)and other banks?ATM machines. A series of hedonic regressions suggests that incompatibilitystrengthens the relationship between deposit account pricing and own ATMs, and weakens therelationship between deposit account pricing and competitors?ATMs. The e¤ects of incom-patibility are stronger in areas with high population density, suggesting that high travel costsincrease both the strength of network e¤ects and the importance of incompatibility in ATMmarkets.
Length: 36
File-URL: https://repec.dss.ucdavis.edu/files/chvyw84yT5aYpjyXWQM36LFx/05-25.pdf
File-Format: application/pdf
Number: 35
Classification-JEL: L1, L8
KeyWords: atm, network effects
Creation-Date: 20050930
Handle: RePEc:cda:wpaper:35