Network Externalities and Shared Electronic Banking Network Adoption

Abstract

A unique data set is used to examine the determinants of membership in theYankee 24 shared Automated Teller Machine (ATM) network. Recent work suggeststhat the presence of demand side network externalities influences the decisionto join a network. A model is constructed in which characteristics of the bankand the market affect the value of the network externality. A hazard functionis estimated to gauge the strength of these various influences in determiningnetwork membership. The results accord with the theoretical model and show thatthe size of the existing network and the number of expected locations in thenetwork, proxied by the number of branches in a bank's market, are both stronginfluences on network adoption that are external to the individual bank.