Entry and pricing in a differentiated products industry: Evidence from the ATM market

Gautam Gowrisankaran, John Krainer

Research output: Contribution to journalArticle

12 Scopus citations

Abstract

We estimate a structural equilibrium model of the automatic teller machine market (ATM) to evaluate the implications of regulating ATM surcharges. We use data on bank characteristics, potential and actual ATM locations, and consumer locations; identify the model parameters with a regression discontinuity design; and develop methods to estimate the model without computing equilibria. A surcharge ban reduces ATM entry 12% and consumer welfare 24% but increases firm profits 27%. Total welfare under either regime is 4% lower than the surplus maximizing level. The article can help shed light on the implications of unregulated entry for differentiated products industries.

Original languageEnglish (US)
Pages (from-to)1-22
Number of pages22
JournalRAND Journal of Economics
Volume42
Issue number1
DOIs
StatePublished - Mar 1 2011

ASJC Scopus subject areas

  • Economics and Econometrics

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