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A Welfare Ranking of Two-Sided Market Regimes

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Author Info
Bergman, Mats A. () (Department of Economics, Södertörn University College)
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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Publisher 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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Related research
Keywords: Two-sided markets; card payments; payment systems; acquiring; issuing; market structure;

Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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References listed on IDEAS
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  1. repec:bep:eaptop:v:3:y:2003:i:1:p:1069-1069 is not listed on IDEAS
  2. Sujit Chakravorti, 2003. "Theory of Credit Card Networks: A Survey of the Literature," Review of Network Economics, Concept Economics, vol. 2(2), pages 50-68, June. [Downloadable!]
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  3. Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  4. Hausman, Jerry A & Leonard, Gregory K & Tirole, Jean, 2003. " On Nonexclusive Membership in Competing Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 43-62, Spring.
    Other versions:
  5. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Blackwell Publishing, vol. 52(1), pages 1-26, 03. [Downloadable!] (restricted)
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  6. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Blackwell Publishing, vol. 50(2), pages 103-22, June. [Downloadable!] (restricted)
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  7. 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.
  8. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics. [Downloadable!]
  9. Sujit Chakravorti & Roberto Roson, 2004. "Platform competition in two-sided markets: the case of payment networks," Working Paper Series WP-04-09, Federal Reserve Bank of Chicago. [Downloadable!]
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  10. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
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  11. Beechey, Meredith, 2004. "Excess Sensitivity and Volatility of Long Interest Rates: The Role of Limited Information in Bond Markets," Working Paper Series 173, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
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