Nonbanks in the Payments System: Vertical Integration Issues
AbstractWe discuss and evaluate the incentives for vertical expansion and vertical mergers in the payments systems industry paying particular attention to the implications of the existence of network effects in this industry. We assess the incentives of large merchants to extend vertically into payments systems, noting that this incentive is maximized when there is significant market power in payments systems and merchants are not sufficiently compensated for the business they bring to the network.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 07-06.
Length: 35 pages
Date of creation: Jun 2007
Date of revision:
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Web page: http://www.NETinst.org/
payments system; credit cards; debit cards; non-banks; vertical integration; market power; monopoly;
Other versions of this item:
- Nicholas Economides, 2007. "Nonbanks in the payments system: vertical integration issues," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
- L80 - Industrial Organization - - Industry Studies: Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-16 (All new papers)
- NEP-BAN-2007-09-16 (Banking)
- NEP-COM-2007-09-16 (Industrial Competition)
- NEP-ICT-2007-09-16 (Information & Communication Technologies)
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