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COMPETING PAYMENT SCHEMES -super-*

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  • GRAEME GUTHRIE
  • JULIAN WRIGHT

Abstract

This paper presents a model of competing payment schemes. Unlike previous work on generic two-sided markets, the model allows for the fact that in a payment system, users on one side of the market (merchants) compete to attract users on the other side (consumers, who may use cards for purchases). It analyzes how competition between card associations and between merchants affects the choice of interchange fees, and thus the structure of fees charged to cardholders and merchants. Implications for other two-sided markets are discussed. Copyright 2007 Blackwell Publishing Ltd..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 55 (2007)
Issue (Month): 1 (03)
Pages: 37-67

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Handle: RePEc:bla:jindec:v:55:y:2007:i:1:p:37-67

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References

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  1. Weiner Stuart E. & Wright Julian, 2005. "Interchange Fees in Various Countries: Developments and Determinants," Review of Network Economics, De Gruyter, vol. 4(4), pages 1-34, December.
  2. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  3. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, 03.
  4. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
  5. Hausman, Jerry A & Leonard, Gregory K & Tirole, Jean, 2003. " On Nonexclusive Membership in Competing Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 43-62, Spring.
  6. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
  7. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-88, October.
  8. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-22, June.
  9. Wright, Julian, 2003. "Pricing in debit and credit card schemes," Economics Letters, Elsevier, vol. 80(3), pages 305-309, September.
  10. Gans Joshua S & King Stephen P, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
  11. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December.
  12. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  13. Joshua S. Gans & Stephen P. King, 2003. "A Theoretical Analysis of Credit Card Reform in Australia," The Economic Record, The Economic Society of Australia, vol. 79(247), pages 462-472, December.
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Cited by:
  1. Rochet, Jean-Charles & Wright, Julian, 2010. "Credit card interchange fees," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1788-1797, August.
  2. Wilko Bolt & Elizabeth Foote & Heiko Schmiedel, 2011. "Consumer credit and payment cards," DNB Working Papers 332, Netherlands Central Bank, Research Department.
  3. Fabio Maria Manenti & Ernesto Somma, 2010. "Plastic Clashes: Competition Among Closed and Open Payment Systems," "Marco Fanno" Working Papers 0111, Dipartimento di Scienze Economiche "Marco Fanno".
  4. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.

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