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The Market for Electronic Cash Cards

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Author Info

  • Shy, Oz

    ()
    (Federal Reserve Banks - Federal Reserve Bank of Boston)

  • Tarkka, Juha

    ()
    (Bank of Finland Research)

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Abstract

We develop a theoretical framework aimed to model the pricing of electronic money (electronic cash cards) and the market domain in which it will be used. We first calculate the fee structures of electronic cash- and charge-card industries for the monopoly and competitive cases. We show that the different market structures do not affect the domain of electronic cash cards and the displacement of currency in daily transactions. We provide a welfare analysis to determine whether a market equilibrium generates an underutilization or overutilization of the electronic cash cards relative to currency. Finally, we evaluate the threshold investment costs, both general and POS-specific, which would prevent the emergence of this industry.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/DP_21_1998.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 21/1998.

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Length: 35 pages
Date of creation: 26 Oct 1998
Date of revision:
Handle: RePEc:hhs:bofrdp:1998_021

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: electronic money; smart cards; displacement of currency;

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  1. Kane, Edward J, 1996. "Comment on Alternative Monies and the Demand for Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 961-64, November.
  2. Pirttilä, Jukka, 1998. "Earmarking of Environmental Taxes: Efficient, After All," Research Discussion Papers 4/1998, Bank of Finland.
  3. Leinonen, Harry, 1998. "Interbank funds transfer systems: liquidity needs, counterparty risks and collateral," Research Discussion Papers 16/1998, Bank of Finland.
  4. Santomero, Anthony M & Seater, John J, 1996. "Alternative Monies and the Demand for Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 942-60, November.
  5. Willman, Alpo & Kortelainen, Mika & Männistö, Hanna-Leena & Tujula, Mika, 1998. "The BOF5 Macroeconomic Model of Finland, Structure and Equations," Research Discussion Papers 10/1998, Bank of Finland.
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