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Antitrust issues in payment card networks: can they do that? should we let them?

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  • Robert Hunt

Abstract

Although people still use cash to pay for goods and services, the trend is toward payment cards. In the U.S., payment card networks coordinate the activities of thousands of financial institutions, millions of retail locations, and several hundred million consumers. This coordination may include the collective setting of certain prices and other controversial network rules. Such practices have recently come under the scrutiny of antitrust authorities in the U.S. and abroad. In "Antitrust Issues in Payment Card Networks: Can They Do That? Should We Let Them?" Bob Hunt describes the economics of the payment card industry and explains how it differs from the textbook model of competitive markets. He argues that these differences should be reflected in the antitrust analysis of payment card networks. ; Also issued as Payments Card Center Discussion Paper No. 03-11

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Bibliographic Info

Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.

Volume (Year): (2003)
Issue (Month): Q2 ()
Pages: 14-23

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Handle: RePEc:fip:fedpbr:y:2003:i:q2:p:14-23

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Keywords: Payment systems;

References

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  1. David S. Evans & Richard Schmalensee, 2001. "Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries," NBER Working Papers 8268, National Bureau of Economic Research, Inc.
  2. Nicholas Economides, . "Network Economics with Application to Finance," Financial Networks _004, Economics of Networks.
  3. Sujit Chakravorti & William R. Emmons, 2001. "Who pays for credit cards?," Occasional Paper; Emerging Payments EPS-2001-1, Federal Reserve Bank of Chicago.
  4. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-22, June.
  5. John P. Caskey & Gordon H. Sellon, Jr., 1994. "Is the debit card revolution finally here?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 79-95.
  6. 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.
  7. Steven D. Felgran & R. Edward Ferguson, 1986. "The evolution of retail EFT networks," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 42-56.
  8. Geoffrey R. Gerdes & Jack K . Walton II, 2002. "The use of checks and other noncash payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Aug, pages 360-374.
  9. Chakravorti, Sujit & To, Ted, 2007. "A theory of credit cards," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 583-595, June.
  10. Kitch, Edmund W, 1990. "The Framing Hypothesis: Is It Supported by Credit Card Issuer Opposition to a Surcharge on a Cash Price?," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 217-33, Spring.
  11. James J. McAndrews, 1997. "Network issues and payment systems," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 15-25.
  12. 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.
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