The Determinants of Optimal Interchange Fees in Payment Systems
AbstractThis paper presents a model of a card payment system as a two-sided market that allows for partial participation by heterogeneous consumers and merchants. Taking into account the strategic effects arising from competition between merchants, the model is used to characterize the optimal structure of fees between those charged to cardholders and those charged to merchants and, more specifically, the level of the interchange fee that banks charge each other. The results modify the existing characterizations of the interchange fee, and explain the source of potential deviations between the privately and socially optimal level of the fee. Copyright Blackwell Publishing Ltd. 2004.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The Journal of Industrial Economics.
Volume (Year): 52 (2004)
Issue (Month): 1 (03)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
Other versions of this item:
- Julian Wright, 2001. "The Determinants of Optimal Interchange Fees in Payment Systems," Industrial Organization 0108001, EconWPA.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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