The Adoption Process of Payment Cards. An Agent-Based Approach
AbstractWe investigate the payment adoption rate under consumersâ€™ and merchantsâ€™ awareness of network externalities, given two levels of Interchange Fees in a multi-agent card market. For the purpose of our research, in multiple instantiations of the model (scenarios) the investigated efects are analyzed over the complete process of adoption, until the marketâ€™s saturation point is achieved. Then, for each scenario, a comparison is made between two diferent levels of Interchange Fees and diferent degree of consumersâ€™ and merchantsâ€™ awareness. To this end, we model explicitly the interactions between consumers and merchants at the point of sale. We allow card issuers to charge consumers with fixed fees and provide net benefits from card usage, whereas acquirers can charge fixed and transactional fees to merchants. The Interchange Fees flows from acquirers to issuers. Though, we acknowledge that the saturation point of the market is not only determined by network externalities and the level of Interchange Fees, but also by macroeconomic factors which we are not exploring at this stage of research.
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Bibliographic InfoPaper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1213.
Length: 28 pages
Date of creation: Jul 2012
Date of revision:
Two-sided markets; financial services; network formation; analysis of collective decisionmaking;
Other versions of this item:
- Biliana Alexandrova-Kabadjova & Sara Gabriela Castellanos Pascacio & Alma L. García-Almanza, 2012. "The Adoption Process of Payment Cards -An Agent- Based Approach," Working Papers 2012-02, Banco de México.
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
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