TY  - JOUR
AU  - Knittel,Christopher R.
AU  - Stango,Victor
TI  - Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10774
PY  - 2004
Y2  - September 2004
UR  - http://www.nber.org/papers/w10774
L1  - http://www.nber.org/papers/w10774.pdf
N1  - Author contact info:
Christopher R. Knittel
MIT Sloan School of Management
100 Main Street, E62-513
Cambridge, MA 02142
E-Mail: knittel@mit.edu

Victor Stango
Graduate School of Management
University of California, Davis
One Shields Avenue
Davis, CA 95616
Tel: 530/752-3535
Fax: 530/752-2924
E-Mail: vstango@ucdavis.edu
AB  - 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.
ER  -