An Empirical Analysis of Payment Card Usage
AbstractThis paper exploits a unique data set on the payment card industry to study issues associated with network effects and two-sided markets. We show that consumers concentrate their spending on a single payment network (single-homing), although many maintain unused cards that allow the ability to use multiple networks (multi-homing). Further, we establish a regional correlation between consumer usage and merchant acceptance within the four major networks (Visa, Mastercard, American Express and Discover). This correlation is suggestive of the existence of a positive feedback loop between consumer usage and merchant acceptance.
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Bibliographic InfoPaper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2006-002.
Date of creation: Jan 2006
Date of revision:
payment cards; two-sided markets; network effects;
Find related papers by JEL classification:
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L80 - Industrial Organization - - Industry Studies: Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-06 (All new papers)
- NEP-CBA-2006-05-06 (Central Banking)
- NEP-COM-2006-05-06 (Industrial Competition)
- NEP-MIC-2006-05-06 (Microeconomics)
- NEP-MKT-2006-05-06 (Marketing)
- NEP-NET-2006-05-06 (Network Economics)
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