|
Archive@NYU >
NET Institute >
NET Institute Working Papers Series >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/28384
|
| Title: | Quantifying Equilibrium Network Externalities in the ACH Banking Industry |
| Authors: | Ackerberg, Daniel A. - University of Arizona and NBER
Gowrisankaran, Gautam - Washington University in St. Louis and NBER |
| Issue Date: | 1-Jan-2003 |
| Series/Report no.: | NET Institute Working Paper;03-06 |
| Abstract: | We seek to estimate the causes and magnitudes of network externalities
for the automated clearinghouse (ACH) electronic payments system, using
a panel data set on individual bank usage of ACH. We construct an
equilibrium model of consumer and bank adoption of ACH in the presence
of a network. The model identifies network externalities from
correlations of changes in usage levels for banks within a network, from
changes in usage following changes in market concentration or sizes of
competitors and from adoption decisions of banks outside the network
with small branches in the network, and can separately identify consumer
and bank network effects. We structurally estimate the parameters of the
model by matching equilibrium behavior to the data, using simulated
maximum likelihood and a data set of localized networks, and use a
bootstrap to recover confidence intervals. The parameters are estimated
with high precision and fit various moments of the data reasonably well.
We find that most of the impediment to ACH adoption is due to large
consumer fixed costs of adoption. The deadweight loss from the network
externality is moderate: the optimal number of ACH transactions is about
16% higher than the equilibrium level. |
| URI: | http://hdl.handle.net/2451/28384 |
| Appears in Collections: | NET Institute Working Papers Series
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
