Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs / Christopher R. Knittel, Victor Stango.

Format:

Book

Author/Creator:

Knittel, Christopher R.

Contributor:

National Bureau of Economic Research.

Stango, Victor.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10962.

NBER working paper series no. w10962

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Incompatibility, Product Attributes and Consumer Welfare

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

Incompatibility in market with network effects reduces consumers' ability to "mix and match" components offered by different sellers, but can also spur changes in product attributes that might benefit consumers. In this paper, we estimate the effects of incompatibility on consumers in a classic hardware/software market: ATM cards and machines. We find that while ATM fees ceteris paribus reduce the network benefit from other banks' ATMs, a surge in ATM deployment accompanies the shift to surcharging. This is valuable to consumers and often completely offsets the harm from higher fees. The results suggest that policy discussions of incompatibility must consider not only its direct effect on consumers, but also its effect on product attributes.

Notes:

Print version record

December 2004.