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Microfoundations of Two-sided Markets: The Payment Card Example Author info | Abstract | Publisher info | Download info | Related research | Statistics James McAndrews
Zhu Wang
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This paper provides a theory of two-sided market dynamics with arguably better microfoundations. These alternative microfoundations focus on observable heterogeneities of both sides of the market in a competitive framework. The theory is rich in empirical predictions and is less dependent on a particular form of imperfect competition than other approaches. Our findings in the payment card example point to adoption costs and the distribution of consumer incomes and firm sizes as the key determinants of the shares of costs borne by each side. This result provides clear implications for industry dynamics and sheds light on the puzzle of asymmetric pricing.
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number
128.
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Date of creation: Jan 2007Date of revision:
Handle: RePEc:dnb:dnbwpp:128Contact details of provider: Postal: Postbus 98, 1000 AB Amsterdam Web page: http://www.dnb.nl/en/ More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Arjen Siegmann).
Keywords: Technology Adoption ; Two-sided Market ; Asymmetric Pricing ; Other versions of this item:
Find related papers by JEL classification: L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General D40 - Microeconomics - - Market Structure and Pricing - - - General O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
This paper has been announced in the following NEP Reports :
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.: Zhu Wang, 2006.
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Other versions:
Stuart E. Weiner & Julian Wright, 2005.
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Richard J. Sullivan, 2000.
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"Competition in Two-Sided Markets ,"
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Other versions: Diego Comin & Bart Hobijn, 2003.
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Staff Reports
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Other versions:
Comin, D. & Hobijn, B., 2003.
"Cross-Country Technology Adoption: Making the Theories Face the Facts ,"
Working Papers
03-04, C.V. Starr Center for Applied Economics, New York University.
[Downloadable!] Comin, D. & Hobijn, B., 2004.
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Journal of Monetary Economics ,
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"Must-Take Cards and the Tourist Test ,"
DNB Working Papers
127, Netherlands Central Bank, Research Department.
[Downloadable!]
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.)
Fumiko Hayashi, 2008.
"The economics of payment card fee structure: what is the optimal balance between merchant fee and payment card rewards? ,"
Research Working Paper
RWP 08-06, Federal Reserve Bank of Kansas City.
[Downloadable!]
Wilko Bolt & Sujit Chakravorti, 2008.
"Economics of Payment Cards: A Status Report ,"
DNB Working Papers
193, Netherlands Central Bank, Research Department.
[Downloadable!]
Fumiko Hayashi, 2008.
"The economics of payment card fee structure: policy considerations of payment card rewards ,"
Research Working Paper
RWP 08-08, Federal Reserve Bank of Kansas City.
[Downloadable!]
Antoine Martin & Michael Orlando, 2007.
"Barriers to network-specific investment ,"
Review of Economic Dynamics ,
Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 705-728, October.
[Downloadable!] (restricted)
Wilko Bolt & Sujit Chakravorti, 2008.
"Consumer choice and merchant acceptance of payment media ,"
Working Paper Series
WP-08-11, Federal Reserve Bank of Chicago.
[Downloadable!]
Other versions: Zhu Wang, 2006.
"Market structure and credit card pricing: what drives the interchange? ,"
Payments System Research Working Paper
PSR WP 06-04, Federal Reserve Bank of Kansas City.
[Downloadable!]
Fumiko Hayashi, 2008.
"The economics of payment card fee structure: what drives payment card rewards? ,"
Research Working Paper
RWP 08-07, Federal Reserve Bank of Kansas City.
[Downloadable!]
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