A Model of the Card Payment System and the Interchange Fee
AbstractWe analyse a card payment system to assess the economic impact of the interchange fee. This fee is paid by the bank of the merchant, the acquirer, to the bank of the consumer, the issuer. We build up a mode in order to explore whether the interchange fee can enhance the participation to the system and thus increase the benefits of the system as a whole. We also investigate what kind of incentives the interchange fee provides to the actors of the system. We show that the interchange fee selected by the card associations differs from the one that would be selected by a welfare maximising social planner. Moreover the interchange fee selected by the market is likely to produce a smaller market for cards than the socially optimal one.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 796.
Date of creation: 2002
Date of revision:
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- 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.
- Bouckaert, J & Degryse, Hans, 2000.
"Price competition between an expert and a non-expert,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/101261, Katholieke Universiteit Leuven.
- Bouckaert, Jan & Degryse, Hans, 2000. "Price competition between an expert and a non-expert," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 901-923, August.
- Bouckaert, J.M.C. & Degryse, H.A., 1998. "Price competition between an expert and a non-expert," Discussion Paper 1998-49, Tilburg University, Center for Economic Research.
- Bouckaert, Jan & Degryse, Hans, 1998. "Price Competition Between an Expert and a Non-Expert," CEPR Discussion Papers 1905, C.E.P.R. Discussion Papers.
- David S. Evans & Richard Schmalensee, 2005.
"The economics of interchange fees and their regulation : an overview,"
Proceedings – Payments System Research Conferences,
Federal Reserve Bank of Kansas City, issue May, pages 73-120.
- Evans, David S. & Schmalensee, Richard L., 2005. "The Economics of Interchange Fees and Their Regulation: An Overview," Working paper 105, Regulation2point0.
- Evans, David & Schmalensee, Richard, 2005. "The Economics of Interchange Fees and Their Regulation: An Overview," Working papers 18181, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, EconWPA.
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