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Network Externalities and Technology Adoption: Lessons from Electronic Payments
Gautam Gowrisankaran and Joanna Stavins
The RAND Journal of Economics
Vol. 35, No. 2 (Summer, 2004), pp. 260-276
Stable URL: http://www.jstor.org/stable/1593691
Page Count: 17
You can always find the topics here!Topics: Banks, Automated clearing houses, Economic externalities, Bank assets, Customers, Retail banking, Federal Reserve Bank, Prices, Bank markets, Payments
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We analyze the extent of network externalities for the automated clearinghouse (ACH) electronic payments system using a panel dataset on bank adoption and usage of ACH. We develop three methods. The first examines the clustering of ACH adoption. The second examines the impact of market concentration and the size of competitors on ACH adoption. The third examines the impact of ACH adoption by small branches of large banks on local competitors. These methods separately identify network externalities from technological advancement, peer-group effects, economies of scale, and market power. We find evidence that the network externalities are moderately large.
The RAND Journal of Economics © 2004 RAND Corporation