TY  - JOUR
AU  - Ackerberg,Daniel A.
AU  - Gowrisankaran,Gautam
TI  - Quantifying Equilibrium Network Externalities in the ACH Banking Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12488
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12488
L1  - http://www.nber.org/papers/w12488.pdf
N1  - Author contact info:
Daniel Ackerberg
Department of Economics
University of Michigan
Lorch Hall
Ann Arbor, MI 48109
E-Mail: ackerber@econ.ucla.edu

Gautam Gowrisankaran
Professor of Economics
Department of Economics
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
AB  - We seek to determine the causes and magnitudes of network externalities for the automated clearinghouse (ACH) electronic payments system. We construct an equilibrium model of customer and bank adoption of ACH. We structurally estimate the parameters of the model using an indirect inference procedure and panel data. The parameters are identified from exogenous variation in the adoption decisions of banks based outside the network and other factors. We find that most of the impediment to ACH adoption is from large customer fixed costs of adoption. Policies to provide moderate subsidies to customers and larger subsidies to banks for ACH adoption could increase welfare significantly.
ER  -