Optimizing ATM placement using game theory

ATM is one of the key delivery channels used by banks to extend banking services to their customers. Facility location is a problem of paramount importance where the aim is to optimize business operations without affecting customer service. In case of delivering banking services this is a challenge because the demand for service and its associated quality expectations are determined by the socio-economic background of the customer. The problem of ATM location is further complicated as customers of one bank can use their debit cards at any other bank ATMs. While this might attract charges, some banks often refund these charges to attract customers. Banks need to have a mechanism to quantitatively measure the benefits of managing their own ATM versus paying for fees to another banks ATM. Game theory is the study of strategic decision making and is an effective technique to identify the best business strategy when provided with multiple options. In this paper we evaluate the strategy of ATM placement by a bank in the presence of multiple competitive banks in a given geographical area.