The mixed oligopoly of cross-border payment systems
AbstractThis paper presents a model depicting cross-border payment systems as a mixed oligopoly. A private net settlement system that maximises profit competes with the central banks’ gross settlement system that maximises welfare. It may be optimal for the central bank system to encourage increased use of the private system by charging fees that exceed the marginal cost. The central bank system is not only a competitor but also an essential service provider, because central bank money is needed for net settlement of payments in the private system. In some cases the central bank system can paradoxically induce the private system to charge lower fees by making it expensive to use central bank money for settlement purposes.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 11/2005.
Length: 35 pages
Date of creation: 11 May 2005
Date of revision:
payment systems; network economics; mixed oligopolies;
Find related papers by JEL classification:
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-21 (All new papers)
- NEP-CBA-2006-10-21 (Central Banking)
- NEP-COM-2006-10-21 (Industrial Competition)
- NEP-FIN-2006-10-21 (Finance)
- NEP-FMK-2006-10-21 (Financial Markets)
- NEP-NET-2006-10-21 (Network 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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98-21, Federal Reserve Bank of Atlanta.
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