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A Welfare Ranking of Two-Sided Market Regimes

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  • Bergman, Mats A.

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    (Department of Economics, Södertörn University College)

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    Abstract

    Two-sided network effects in card payment systems are analysed under different market structures, e.g., competition, one-sided monopoly, bilateral monopoly and duopoly; with and without an interchange fee; for the so-called Baxter’s case of non-strategic merchants. A partial ranking of market structures according to their welfare effects is provided. Some support is found for the policy adopted by the EU Commission in the competition law case concerning Visa’s interchange fees.

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    Bibliographic Info

    Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 185.

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    Length: 30 pages
    Date of creation: 01 Jun 2005
    Date of revision: 01 Sep 2005
    Handle: RePEc:hhs:rbnkwp:0185

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    Keywords: Two-sided markets; card payments; payment systems; acquiring; issuing; market structure;

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    1. Chakravorti, Sujit & To, Ted, 2007. "A theory of credit cards," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 25(3), pages 583-595, June.
    2. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(2), pages 103-22, June.
    3. Chakravorti Sujit, 2003. "Theory of Credit Card Networks: A Survey of the Literature," Review of Network Economics, De Gruyter, De Gruyter, vol. 2(2), pages 1-19, June.
    4. Beechey, Meredith, 2004. "Excess Sensitivity and Volatility of Long Interest Rates: The Role of Limited Information in Bond Markets," Working Paper Series, Sveriges Riksbank (Central Bank of Sweden) 173, Sveriges Riksbank (Central Bank of Sweden).
    5. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 52(1), pages 1-26, 03.
    6. Alexander F. Tieman & Wilko Bolt, 2003. "Pricing Debit Card Payment Services," IMF Working Papers, International Monetary Fund 03/202, International Monetary Fund.
    7. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 26(3), pages 541-88, October.
    8. Sujit Chakravorti & Roberto Roson, 2004. "Platform competition in two-sided markets: the case of payment networks," Working Paper Series, Federal Reserve Bank of Chicago WP-04-09, Federal Reserve Bank of Chicago.
    9. Wilko Bolt & Alexander F Tieman, 2005. "Skewed Pricing in Two-Sided Markets: An IO approach," Money Macro and Finance (MMF) Research Group Conference 2005, Money Macro and Finance Research Group 75, Money Macro and Finance Research Group.
    10. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers, National University of Singapore, Department of Economics wp0311, National University of Singapore, Department of Economics.
    11. Gans Joshua S & King Stephen P, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 3(1), pages 1-18, January.
    12. Jerry A. Hausman & Gregory K. Leonard & Jean Tirole, 2003. "On Non-Exclusive Membership in Competing Joint Ventures," Levine's Working Paper Archive 506439000000000145, David K. Levine.
    13. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 152, Institut d'Économie Industrielle (IDEI), Toulouse.
    14. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization, EconWPA 0505009, EconWPA.
    15. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
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