Incorporating a "public good factor" into the pricing of large-value payment systems
AbstractWe study optimal pricing rules for a public large-value payment system (LVPS) that produces a public good (like prevention of systemic risk) but faces competition by a private LVPS for the private provision of large value payments. We show that the marginal cost of the public LVPS has to be corrected by a "public good factor"that can be interpreted alternatively as the decrease in the cost of providing the public good when the private activity of the public system increases, or as the subsidy needed for private banks to internalize the cost of systemic risk. In either interpretation, the public good factor is easy to measure: it corresponds to the subsidy needed for private banks to allocate their payments in the way that is desired by banking authorities. JEL Classification: G28, H41
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Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 0507.
Date of creation: Jul 2005
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Find related papers by JEL classification:
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-05 (All new papers)
- NEP-FIN-2005-10-04 (Finance)
- NEP-PBE-2005-10-07 (Public Economics)
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.:
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