On the incentives to Form Strategic Coalitions
in ATM Markets, by T. Wenzel
Comments by M. Manant
CNAM
October 25, 2007
On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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• Aim of the paper:
Study the formation of coalitions in retail banking.
• Questions:
Under which conditions is it profitable for banks to make agreements
to ban foreign and surcharge fees?
• Two effects of forming a coalition:
 - reduces the incomes from ATM transactions,
 - weakens competition.
On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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• The model:
Consumers uniformly located on the line (location denoted x) face a
linear cost of transportation.
Case of asymmetric networks where consumers have a probability Pi
to find an ATM of bank i.
Two kinds of services: general banking services and ATM services.
On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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Timing:
Stage 1: Banks decide or not to enter the coalition.
Stage 2: Banks decide cooperatively on interchange fees.
Stage 3: Banks set non-cooperatively account fees.
Stage 4: Consumers decide to open or not an account.
Stage 5: Banks decide non-cooperatively on ATM usage fees in the case of
no coalition.
Stage 6: Consumers decide on ATM use.
On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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Results:
Basic model (Pi = Pj = P)
•
A strategic coalition is more likely for higher values of V (gross utility from
general service) and higher values of P.
•
Consumer surplus is lower and welfare is higher under coalition.
Asymmetric model (P1 > P2)
•
The bank with a smaller network has a larger incentive to form a coalition.
Investments in ATM networks
•
Banks have weaker incentives to form a coalition when they can invest in ATM
networks than when they can not.
On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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Questions:
• About the definition of the expression “strategic ATM coalition”?
• what means strategic in this context?
• does a coalition suppose at least 3 members?
• Stylized facts. How banks justify that they take part to banking
networks?
• The timing: what would it change if we invert stage 4 and stage 5?
• Possible extensions
• study of coalition in a market with 3 or more.
• consider network externalities.
On the incentives to Form Strategic Coalitions in ATM Markets, by T. Wenzel - Comments - 10 25 2007
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