26 Jul 2008

ATMs -- Tragedy of the Commons?

Till a few months back, in India, banks used to charge a substantial fee for using an ATM card in an ATM of a different bank. But now the banking regulator in India brought this fee down to a neglible amount. Could this result in banks not investing much in ATMs because the benefit will be spread across all banks but the cost will be borne only by the bank setting up the ATM -- a classic tragedy of the commons? We'll know in a few years.

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