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Merchant internalization revisited

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  • Ding, Rong

Abstract

Merchant internalization has been proposed as a key reason for biases in the setting of fees in payment card platforms. It has been shown to hold under several specific models of imperfect competition. This paper unifies and extends the existing payment card literature by showing that merchant internalization holds under a very general model of competition.

Suggested Citation

  • Ding, Rong, 2014. "Merchant internalization revisited," Economics Letters, Elsevier, vol. 125(3), pages 347-349.
    • Handle: RePEc:eee:ecolet:v:125:y:2014:i:3:p:347-349
    DOI: 10.1016/j.econlet.2014.10.009
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    References listed on IDEAS

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    1. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 107-120.
    2. Julian Wright, 2012. "Why payment card fees are biased against retailers," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 761-780, December.
    3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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    8. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    9. Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
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    11. Wright Julian, 2010. "Why Do Merchants Accept Payment Cards?," Review of Network Economics, De Gruyter, vol. 9(3), pages 1-8, August.
    12. Jean‐Charles Rochet & Jean Tirole, 2011. "Must‐Take Cards: Merchant Discounts And Avoided Costs," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 462-495, June.
    13. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
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    Cited by:

    1. Angelika Welte, 2016. "Wait a Minute: The Efficacy of Discounting versus Non-Pecuniary Payment Steering," Staff Working Papers 16-8, Bank of Canada.
    2. Aurazo, Jose, 2020. "Merchant internalization and tax evasion," Research in Economics, Elsevier, vol. 74(4), pages 273-276.
    3. Rong Ding & Julian Wright, 2017. "Payment Card Interchange Fees and Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 39-72, March.
    4. Reisinger, Markus & Zenger, Hans, 2019. "Interchange fee regulation and service investments," International Journal of Industrial Organization, Elsevier, vol. 66(C), pages 40-77.

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