ATM SURCHARGES: EFFECTS ON DEPLOYMENT AND WELFARE

Authors


  • *We are greatly indebted to the Editor and an anonymous referee for valuable comments that significantly improved this paper. We also thank Ramon Caminal and seminar participants at the University of Castellon, the University of Alicante, UAB, EEA, EARIE, WCR, JEI and ASSET for helpful suggestions. Financial support from SEJ 2007-62656 and the IVIE is also gratefully acknowledged. Any remaining errors are ours.

Abstract

This paper analyzes the effects of ATM surcharges on deployment and welfare, in a model where banks compete for ATM and banking services. Foreign fees, surcharges and the interchange fee are endogenously determined. We find situations in which surcharges are welfare enhancing. Under strategic fee setting, the increase in deployment caused by surcharging might compensate the surplus loss caused by the increase in prices.

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