Compatibility and pricing with indirect network effects: evidence from ATMs

Christopher Knittel and Victor Stango

No WP-03-33, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Incompatibility in markets with indirect network effects can reduce consumers? willingness to pay if they value ?mix and match? combinations of complementary network components. For integrated firms selling complementary components, incompatibility should also strengthen the demand-side link between 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 and other banks? ATM machines. We find that incompatibility led to lower willingness to pay for deposit accounts. We also find that incompatibility benefited firms with large ATM fleets.

Keywords: Automated; tellers (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-com and nep-net
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs (2005)
Working Paper: Compatibility and Pricing with Indirect Network Effects: Evidence from ATMs (2004)
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