"Rip-Off" ATM Surcharges
Year: 2002
Type: article
Abstract: 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 non-members users, fees that exceed those levels that would maximize ATM revenues from non-members; and larger banks set higher account fees and demand higher surcharges for ATM use than smaller banks. Paradoxically, we find that (i) A bank's ATM revenues may fall short of its costs of ATM provision; and (ii) Prohibiting banks from surcharging non-members, by forcing banks to charge members and non-members the same ATM price, leads to higher ATM prices, greater bank profits, and reduced consumer welfare.
Source: The RAND Journal of Economics
DOI: 10.2307/2696377
Authors: Nadia Massoud, Dan Bernhardt
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2129609725