Quantifying Equilibrium Network Externalities in the ACH Banking Industry / Daniel A. Ackerberg, Gautam Gowrisankaran.

Format:

Book

Author/Creator:

Ackerberg, Daniel A.

Contributor:

National Bureau of Economic Research.

Gowrisankaran, Gautam.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12488.

NBER working paper series no. w12488

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

We seek to determine the causes and magnitudes of network externalities for the automated clearinghouse (ACH) electronic payments system. We construct an equilibrium model of customer and bank adoption of ACH. We structurally estimate the parameters of the model using an indirect inference procedure and panel data. The parameters are identified from exogenous variation in the adoption decisions of banks based outside the network and other factors. We find that most of the impediment to ACH adoption is from large customer fixed costs of adoption. Policies to provide moderate subsidies to customers and larger subsidies to banks for ACH adoption could increase welfare significantly.

Notes:

Print version record

August 2006.