Working Paper

Retail pricing of ATM network services

Abstract: This paper develops a model of wholesale and retail fee-setting for automated teller machine (ATM) network services, and comparative statics results are derived. Retail ATM fees are shown to be dependent on the demand-side network effect and economies of scale in production of network services. These, in turn, are functions of the size of the ATM network. Survey data on bank fees are linked with the bank's probable ATM network membership, and the retail ATM fees are regressed on ATM network size and other variables in a reduced-form estimation. The results suggest that both network effects in demand and economies of scale influence retail ATM network service fees, with economies of scale becoming dominant for the largest ATM networks.

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 1996

Number: 96-12