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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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Author Info
Howard Chang () (LECG, LLC)
David S. Evans (LECG, LLC)
Daniel D. Garcia Swartz (LECG, LLC)

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

Volume (Year): 4 (2005)
Issue (Month): 4 (December)
Pages: 328-358
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Handle: RePEc:rne:rneart:v:4:y:2005:i:4:p:328-358

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Related research
Keywords: Interchange fee; Regulation; RBA; Australia;

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. Timothy J. Besley & Harvey S. Rosen, 1998. "Sales Taxes and Prices: An Empirical Analysis," NBER Working Papers 6667, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Borenstein, Severin & Cameron, A Colin & Gilbert, Richard, 1997. "Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes?," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 305-39, February.
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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. Ron Borzekowski & Elizabeth K. Kiser & Shaista Ahmed, 2006. "Consumers' use of debit cards: patterns, preferences, and price response," Finance and Economics Discussion Series 2006-16, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  2. Nicholas Economides, 2008. "Competition Policy Issues in the Consumer Payments Industry," Working Papers 08-29, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
  3. Joseph Farrell, 2006. "Efficiency and Competition between Payment Instruments," Review of Network Economics, Concept Economics, vol. 5(1), pages 26-44, March. [Downloadable!]
  4. Jean-Charles Rochet & Jean Tirole, 2006. "Externalities and Regulation in Card Payment Systems," Review of Network Economics, Concept Economics, vol. 5(1), pages 1-14, March. [Downloadable!]
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