TY - JOUR
T1 - Entry and pricing in a differentiated products industry
T2 - Evidence from the ATM market
AU - Gowrisankaran, Gautam
AU - Krainer, John
PY - 2011/3
Y1 - 2011/3
N2 - We estimate a structural equilibrium model of the automatic teller machine market (ATM) to evaluate the implications of regulating ATM surcharges. We use data on bank characteristics, potential and actual ATM locations, and consumer locations; identify the model parameters with a regression discontinuity design; and develop methods to estimate the model without computing equilibria. A surcharge ban reduces ATM entry 12% and consumer welfare 24% but increases firm profits 27%. Total welfare under either regime is 4% lower than the surplus maximizing level. The article can help shed light on the implications of unregulated entry for differentiated products industries.
AB - We estimate a structural equilibrium model of the automatic teller machine market (ATM) to evaluate the implications of regulating ATM surcharges. We use data on bank characteristics, potential and actual ATM locations, and consumer locations; identify the model parameters with a regression discontinuity design; and develop methods to estimate the model without computing equilibria. A surcharge ban reduces ATM entry 12% and consumer welfare 24% but increases firm profits 27%. Total welfare under either regime is 4% lower than the surplus maximizing level. The article can help shed light on the implications of unregulated entry for differentiated products industries.
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U2 - 10.1111/j.1756-2171.2010.00123.x
DO - 10.1111/j.1756-2171.2010.00123.x
M3 - Article
AN - SCOPUS:79951546692
SN - 0741-6261
VL - 42
SP - 1
EP - 22
JO - RAND Journal of Economics
JF - RAND Journal of Economics
IS - 1
ER -