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An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems

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Author Info
Jean-Charles Rochet () (IDEI, Toulouse University, and LSE)
Jean Tirole (IDEI, Toulouse University, and MIT)

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Abstract

The paper investigates, in a non-technical fashion, the economic determinants of interchange fees in payment card systems and the potential need for their regulation. Among other things, it demonstrates that the proposal for a cost-based regulation of interchange fees relies on an erroneous, vertically organized, model of the payment card industry.

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Publisher Info
Article provided by Concept Economics in its journal Review of Network Economics.

Volume (Year): 2 (2003)
Issue (Month): 2 (June)
Pages: 69-79
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Handle: RePEc:rne:rneart:v:2:y:2003:i:2:p:69-79

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Related research
Keywords: Payment systems credit cards interchange fees regulation banks

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References listed on IDEAS
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.:
  1. Joshua Gans & Stephen King, 2003. "The Neutrality of Interchange Fees in Payment Systems," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), pages 1069-1069. [Downloadable!] (restricted)
  2. ROCHET, Jean-Charles & TIROLE, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  3. 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.
  4. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics. [Downloadable!]
  5. Julian Wright, 2001. "The Determinants of Optimal Interchange Fees in Payment Systems," Industrial Organization 0108001, EconWPA. [Downloadable!]
    Other versions:
  6. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Nicholas Economides & Joacim Tag, 2007. "Net Neutrality on the Internet: A Two-sided Market Analysis," Working Papers 07-27, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
  2. James McAndrews & Zhu Wang, 2007. "Microfoundations of Two-sided Markets: The Payment Card Example," DNB Working Papers 128, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  3. Anderson, Simon P & Gabszewicz, Jean Jaskold, 2005. "The Media and Advertising: A Tale of Two-Sided Markets," CEPR Discussion Papers 5223, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Stuart E. Weiner & Julian Wright, 2005. "Interchange Fees in Various Countries: Developments and Determinants," Review of Network Economics, Concept Economics, vol. 4(4), pages 290-323, December. [Downloadable!]
    Other versions:
  5. Carol Clark, 2005. "Shopping without cash: the emergence of the e-purse," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 34-51. [Downloadable!]
  6. Nicholas Economides, 2007. "Nonbanks in the Payments System: Vertical Integration Issues," Working Papers 07-06, NET Institute, revised Aug 2007. [Downloadable!]
    Other versions:
  7. David Gilo & Yossi Spiegel, 2005. "The Credit Card Industry in Israel," Review of Network Economics, Concept Economics, vol. 4(4), pages 266-289, December. [Downloadable!]
  8. AMELIO, Andrea & JULLIEN, Bruno, 2007. "Tying and Freebies in Two-Sided Markets," IDEI Working Papers 445, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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