EclectEcon

The core intuition is that a given ATM often has monopoly power ex post, once you are there and need the money. Lower fees mean fewer machines but that still might be better than facing the mark-up.

Well, let's ban supranormal markups on chocolate bars, soft drinks, etc., all sold by variety stores, too. They all are sold under conditions of situational monopolies.

For repeat purchases, like candy, pop, and ATM usage, if one outlet rips me off in the situational monopoly, I don't use them again unless it is to my benefit to use them. And sometimes it is — e.g. when I'd rather pay an extra 50 cents than walk or drive an additional block or two.

In other words, there is something fatally flawed in their measures of consumer surplus if those measures don't include convenience and don't make allowances for the value consumers receive from increased choice sets. I know some people (Bob Frank?) think that increasing consumer choice is a bad thing, but I like having more options to having fewer.

In our town we have options: we can use an ATM at a bank and pay nothing extra, or we can use an ATM at a convenience store and pay a bit extra. This seems ideal to me. We get the extra choice, but we don't have to pay more if we're willing to go to our bank.