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Efficient Pricing of Large Value Interbank Payment Systems

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Author Info
Holthausen, Cornelia
Rochet, Jean Charles

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Abstract

This Paper studies the efficient pricing of large-value payment systems in the presence of unobservable heterogeneity across banks. It is shown that the optimal pricing scheme for a public monopoly system involves quantity discounts in the form of a decreasing marginal fee. This is also true when the public system competes with a private system characterized by a lower marginal cost. In this case, however, optimal marginal fees in the public system are lower than its marginal cost, and fixed fees have to be levied. We also study the case of competition between several public systems. The structure of the optimal tariff depends on the willingness of Central Banks to allow by-pass.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3943.

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Date of creation: Jun 2003
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Handle: RePEc:cpr:ceprdp:3943

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Related research
Keywords: non-linear pricing; payment systems;

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Find related papers by JEL classification:
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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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. Wilko Bolt & David B. Humphrey, 2005. "Public Good Aspects of TARGET: Natural Monopoly, Scale Economies, and Cost Allocation," DNB Working Papers 036, Netherlands Central Bank, Research Department. [Downloadable!]
  2. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Working Papers 07-28, Bank of Canada. [Downloadable!]
  3. Wilko Bolt & David Humphrey, 2005. "Public good issues in TARGET - natural monopoly, scale economies, network effects and cost allocation," Working Paper Series 505, European Central Bank. [Downloadable!]
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