TY  - JOUR
AU  - Gowrisankaran,Gautam
AU  - Krainer,John
TI  - The Welfare Consequences of ATM Surcharges: Evidence from a Structural Entry Model
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12443
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12443
L1  - http://www.nber.org/papers/w12443.pdf
N1  - Author contact info:
Gautam Gowrisankaran
Associate Professor of Economics
Department of Economics
Eller College of Management
University of Arizona
P.O. Box 210108
Tucson, AZ 85721-0108
Tel: (520)621-2529
Fax: (520)621-8450
E-Mail: gowrisankaran@eller.arizona.edu

John Krainer
Research Department
Federal Reserve Bank of San Francisco
P.O. Box 7702
San Francisco, CA  94120
E-Mail: john.krainer@sf.frb.org
AB  - We estimate a structural model of the market for automatic teller machines (ATMs) in order to evaluate the implications of regulating ATM surcharges on ATM entry and consumer and producer surplus. We estimate the model using data on firm and consumer locations, and identify the parameters of the model by exploiting a source of local quasi-experimental variation, that the state of Iowa banned ATM surcharges during our sample period while the state of Minnesota did not. We develop new econometric methods that allow us to estimate the parameters of equilibrium models without computing equilibria. Monte Carlo evidence shows that the estimator performs well. We find that a ban on ATM surcharges reduces ATM entry by about 12 percent, increases consumer welfare by about 35 percent and lowers producer profits by about 20 percent. Total welfare remains about the same under regimes that permit or prohibit ATM surcharges and is about 17 percent lower than the surplus maximizing level. This paper can help shed light on the theoretically ambiguous implications of free entry on consumer and producer welfare for differentiated products industries in general and ATMs in particular.
ER  -