NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs

Christopher R. Knittel, Victor Stango

NBER Working Paper No. 10774
Issued in September 2004
NBER Program(s):   PR

Incompatibility in markets with indirect network effects can affect prices if consumers value "mix and match" combinations of complementary network components. In this paper, we examine the effects of incompatibility using data from a classic market with indirect network effects: Automated Teller Machines (ATMs). Our sample covers a period during which higher ATM fees increased incompatibility between ATM cards (which are bundled with deposit accounts) and other banks' ATM machines. A series of hedonic regressions suggests that incompatibility strengthens the relationship between deposit account pricing and own ATMs, and weakens the relationship between deposit account pricing and competitors' ATMs. The effects of incompatibility are stronger in areas with high population density, suggesting that high travel costs increase both the strength of network effects and the importance of incompatibility in ATM markets.

download in pdf format
   (673 K)

email paper

This paper is available as PDF (673 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10774

Users who downloaded this paper also downloaded these:
Gertler, Gilchrist, and Natalucci w10128 External Constraints on Monetary Policy and the Financial Accelerator
Goldberg and Campa w12121 Distribution Margins, Imported Inputs, and the Sensitivity of the CPI to Exchange Rates
Eichengreen and Mody w7458 Would Collective Action Clauses Raise Borrowing Costs?
Forman, Goldfarb, and Greenstein w9979 How did Location Affect Adoption of the Commercial Internet? Global Village, Urban Density, and Industry Composition
Campa and Goldberg w8934 Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us