Shared ATM networks and banking competition

Abstract

In this paper we study the incentives of banks to share their Automatic Teller Machines (ATMs) when they are competitors in the market for deposits. We construct a stylized model of banking competition which emphasises the distinctive features of ATM compatibility. We find that in equilibrium either a strict subset of banks share their ATMs or total incompatibility prevails. We also derive the implications for ATM compatibility of withdrawal fees, interchange bank fees, entry, and depositor switching costs. Finally, we investigate the normative implications of our model and draw some policy conclusions. © 1994.