Finance and Economics Discussion Series (FEDS)
November 2026
Heterogeneity in Service Fee Sensitivity: Evidence from ATM Surcharges
Abstract:
Service fees continue to proliferate in a wide range of markets, from retail to payments, generating questions about their impact on consumer choice, competition, and fairness. This paper explores how sensitivity to such fees varies across consumers, use cases, and competitive settings, and whether it is affected by consumer learning. I am able to conduct this in-depth empirical analysis thanks to a uniquely detailed, high-frequency panel data set on surcharged ATM cash withdrawals. Results show that average elasticity estimates mask substantial heterogeneity in consumer sensitivity to service fees. I explore ways in which market and behavioral mechanisms can help explain this heterogeneity. Finally, I investigate whether consumers strategically adjust their behavior in response to service fees.
DOI: https://doi.org/10.17016/FEDS.2026.072
PDF: Full Paper
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