Fraud, Investments and Liability Regimes in Payment Platforms
AbstractIn this paper, we discuss how fraud liability regimes impact the price structure that is chosen by a monopolistic payment platform, in a setting where merchants can invest in fraud detection technologies. We show that liability allocation rules distort the price structure charged by platforms or banks to consumers and merchants with respect to a case where such a responsibility regime is not implemented. We determine the allocation of fraud losses between the payment platform and the merchants that maximises the platform's profit and we compare it to the allocation that maximises social welfare.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2011-31.
Length: 54 pages
Date of creation: 2011
Date of revision:
payment card systems; interchange fees; two-sided markets; fraud; liability;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-14 (All new papers)
- NEP-BAN-2011-11-14 (Banking)
- NEP-COM-2011-11-14 (Industrial Competition)
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