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The Effect of Regulatory Intervention in Two-Sided Markets: An Assessment of Interchange-Fee Capping in Australia

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  • Chang Howard

    ()
    (LECG, LLC)

  • Evans David S.

    ()
    (LECG, LLC)

  • Garcia Swartz Daniel D.

    ()
    (LECG, LLC)

Abstract

We examine the impact to date of the Reserve Bank of Australia's decision to reduce interchange fees on credit cards in Australia by almost half. We find that, in the short run, issuers have recovered between 30 and 40 percent of the loss of interchange fees. Merchants have benefited from lower fees but it is questionable whether those benefits have been substantially passed on to their customers. The per-transaction price at the point of sale has not changed significantly and there is relatively little evidence thus far that the intervention has affected the volume of card transactions in Australia.

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File URL: http://www.degruyter.com/view/j/rne.2005.4.4/rne.2005.4.4.1080/rne.2005.4.4.1080.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal Review of Network Economics.

Volume (Year): 4 (2005)
Issue (Month): 4 (December)
Pages: 1-31

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Handle: RePEc:bpj:rneart:v:4:y:2005:i:4:n:5

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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. Neumark, David & Sharpe, Steven A, 1992. "Market Structure and the Nature of Price Rigidity: Evidence from the Market for Consumer Deposits," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 657-80, May.
  3. David Evans & Richard Schmalensee, 2007. "The Industrial Organization of Markets with Two-Sided Platforms," CPI Journal, Competition Policy International, vol. 3.
  4. Dennis W. Carlton, 1987. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
  5. Chakravorti Sujit, 2003. "Theory of Credit Card Networks: A Survey of the Literature," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-19, June.
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Cited by:
  1. Ardizzi, Guerino, 2013. "Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods," MPRA Paper 48088, University Library of Munich, Germany, revised 25 May 2013.
  2. Ron Borzekowski & K. Kiser Elizabeth & Ahmed Shaista, 2008. "Consumers' Use of Debit Cards: Patterns, Preferences, and Price Response," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(1), pages 149-172, 02.
  3. Damien Neven & Svend Albæk, 2008. "Antitrust Update: DG Competition 2007–2008," Review of Industrial Organization, Springer, vol. 33(3), pages 231-246, November.
  4. Tosza, Katarzyna, 2009. "Payment Card Systems as an Example of two-sided Markets - a Challenge for Antitrust Authorities," MPRA Paper 23822, University Library of Munich, Germany.
  5. Wilko Bolt & Sujit Chakravorti, 2011. "Pricing in Retail Payment Systems: A Public Policy Perspective on Pricing of Payment Cards," DNB Working Papers 331, Netherlands Central Bank, Research Department.
  6. Verdier, Marianne, 2012. "Interchange fees and inefficiencies in the substitution between debit cards and cash," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 682-696.
  7. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
  8. Rochet, Jean-Charles & Wright, Julian, 2009. "Credit card interchange fees," Working Paper Series 1138, European Central Bank.

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