Discussion of“Coordinated Investment in a Shared ATM network” by Stijn

Ferrari, Frank Verboven & Hans Degryse

Lapo FilistrucchiTilburg University & University of

Siena

Economics of Payment Systems

Paris, October 2007

The paperNice paper

Well written

More advanced then it claims

Discussion 1

Not easy to discuss

Main:

Inelastic per capita cash withdrawals

Compatibility

Introducing fees for policy simulation

Welfare standards

Minor:

Some typos and incomplete references

Q=2.07 comes from?

Discussion 2Assumption that

Per capita cash withdrawals (ATM+branches) are inelastic with respect to the number of ATMs

despite

Increasing relationship between ATM cash withdrawals and number of ATMs

so that

Consumers substitute away from cash withdrawals at branches to cash withdrawals at ATM

Assumption

•Clearly due to lack of data on total per capita cash withdrawals at local market level

•Claimed to be justified because simple correlation shows that consumers do not withdraw lower amounts of cash at ATMs when more ATMS are introduced

Discussion 3In practice assumption that:

•No effect of the number of ATMs on the amount a consumer spends

•At the aggregate introduction of ATMs lead only to cost savings, no effect on economic activity

Realistic?

•Think to be in a shopping mall in a rainy Saturday afternoon…

It would be best to allow for elastic per capita cash withdrawals.

If not possible, discuss what is the likely bias that the assumption introduces

Surely an effect on the estimates of cost savings

Discussion 4

“(In)compatibility”

Used in the previous literature

But

A bit ambiguous…

- Technical incompatibility (S.E.P.A) or just due to “on-other fees” and surcharges?

- Case of Italy?

At least a note…

Discussion 5

Policy simulation:

- Introduction of uniform fees

But

- What if only “on-other” fees? Still underinvestment?

Claim discussed in the previous literature, but abstracting from variable cost incentives

Also

- which standard for social optimum?

EU DG competition, RBA -> (fair share) consumer surplus

First best : consumer surplus ↓ producer surplus↑ government loss↑ !?