Game Theory and ATMs
https://www.atkearney.com/analytics/ideas-insights/article/-/asset_publisher/hZFiG2E3WrIP/content/atm-banking-game-theory-profits/10192?_101_INSTANCE_hZFiG2E3WrIP_redirect=%2Fanalytics%2Fideas-insights
The addition of the ATM into the banking system changed the banking game dramatically–customers could get their money more conveniently, banks made much more money and branches of banks got cut. An important aspect of an ATM is its location. A study found that, for a U.K. bank with 2,500 ATMs, when its lowest performing ATM’s location is improved, its increase in profit was equivalent to 45 extra withdrawals a day which is $19 million more in revenue per year. Game theory comes into play here when competing banks have to decide where to place their ATMs. Usually factors include how much traffic go by an ATM which decides the additional revenue the bank would get from putting an ATM there and what your competitors will do knowing the same circumstances about the quality of the location. In this game, the players are the banks, the strategies are their decisions to place ATMs, and the payoffs are the additional revenues the banks would make.
From here, banks perform the standard analysis of payoff matrices to maximize their profits. Of course this is an extremely simplified version of the game theory that actual banks have to deal with, but it involves the same concepts. Banks also must decide whether to compete with each other or cooperate because there are circumstances when cooperating could result in even more total revenue for both banks while also being much more convenient for the customers; everybody wins. From this, it is seen that game theory is a very important concept for banks and their ATMs.