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HOW DOES INCOMPATIBILITY AFFECT PRICES?: EVIDENCE FROM ATM'S *
Author(s) -
KNITTEL CHRISTOPHER R.,
STANGO VICTOR
Publication year - 2009
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2009.00387.x
Subject(s) - competitor analysis , affect (linguistics) , population , business , value (mathematics) , microeconomics , economics , monetary economics , marketing , statistics , mathematics , linguistics , philosophy , demography , sociology
If consumers value ‘mix and match’ combinations of network complements, incompatibility between different sellers' components should affect prices. In ATM markets, a 1996 governance change exogenously generated such incompatibility, by allowing banks to impose surcharges when other banks' deposit customers use their ATM's. In our data, incompatibility makes the relationship between deposit account pricing and own ATM's more positive, and makes the relationship between deposit account pricing and competitors ATM's more negative. The level effect on prices is positive. The pattern of results is more pronounced in high population density markets, where customers may care more about ATM's.