Competition before sunset : The case of the Finnish ATM market

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Title: Competition before sunset : The case of the Finnish ATM market
Author: Kopsakangas-Savolainen, Maria ; Takalo, Tuomas
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2012
Series number: 32/2012
Year of publication: 2012
Publication date: 8.11.2012
Published in: Published in Review of Network Economics
DOI: 10.1515/rne-2012-0018
Pages: 34 s.
Keywords: Suomi; maksut; kustannukset; sääntely; kilpailu; mallit; pankkiautomaatit; käteinen
Abstract: We build a simple model to study service fee competition between an incumbent and an independent ATM deployer, and its optimal regulation. We use the model to analyze an actual regulation of such a market by competition authorities in Finland. We find that socially optimal first-best fees would imply negative profits for the independent deployer, calling for a Ramsey regulation. While the Finnish regulation pushes the foreign fee downwards towards its socially optimal level, the regulated fees are likely to remain too high from the welfare point of view. In contrast with the actual regulation, it would be essential to regulate the independent deployer's interchange fee, as the incumbent deployer internalizes the effect of its foreign fee on consumer usage of the rival's network and has little incentive for foreclosure.

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