ATM SURCHARGES: EFFECTS ON DEPLOYMENT AND WELFARE^*

Abstract

This paper analyzes the effects of ATM surcharges on deployment and welfare, in a model where banks compete for ATM and banking services. Foreign fees, surcharges and the interchange fee are endogenously determined. We find situations in which surcharges are welfare enhancing. Under strategic fee setting, the increase in deployment caused by surcharging might compensate the surplus loss caused by the increase in prices.