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Competing Payment Schemes

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Author Info
Graeme Guthrie (Victoria University of Wellington)
Julian Wright () (National University of Singapore)

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Abstract

This paper presents a model of competing payment schemes. Unlike previous work on generic twosided markets, the model allows for the fact that in a payment system users on one side of the market (merchants) compete to attract users on the other side (consumers who may use cards for purchases). It analyzes how competition between card associations and between merchants affects the choice of interchange fees, and thus the structure of fees charged to cardholders and merchants. Implications for other two-sided markets are discussed.

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Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0311.

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Date of creation: Sep 2003
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Handle: RePEc:nus:nusewp:wp0311

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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.:
  1. Joshua Gans & Stephen King, 2003. "The Neutrality of Interchange Fees in Payment Systems," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), pages 1069-1069. [Downloadable!] (restricted)
  2. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May. [Downloadable!] (restricted)
  3. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December. [Downloadable!] (restricted)
  4. ROCHET, Jean-Charles & TIROLE, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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  5. 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.
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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. Wright, Julian, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Blackwell Publishing, vol. 50(3), pages 289-315, September. [Downloadable!] (restricted)
  9. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
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  10. Wright, Julian, 2003. "Pricing in debit and credit card schemes," Economics Letters, Elsevier, vol. 80(3), pages 305-309, September. [Downloadable!] (restricted)
  11. Geoffrey G. Parker & Marshall W. Van Alstyne, 2000. "Information Complements, Substitutes, and Strategic Product Design," William Davidson Institute Working Papers Series 299, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Sandra Deungoue, 2008. "Compétition pour les paiements : une titanomachie revisitée par la modélisation multi-agents," Post-Print halshs-00269129_v1, HAL. [Downloadable!]
  2. Stuart E. Weiner & Julian Wright, 2005. "Interchange fees in various countries: developments and determinants," Payments System Research Working Paper PSR WP 05-01, Federal Reserve Bank of Kansas City. [Downloadable!]
    Other versions:
  3. Roberto Roson, 2005. "Platform Competition with Endogenous Multihoming," Working Papers 2005.20, Fondazione Eni Enrico Mattei. [Downloadable!]
  4. John Simon, 2005. "Payment Systems Are Different: Shouldn't Their Regulation Be Too?," Review of Network Economics, Concept Economics, vol. 4(4), pages 364-383, December. [Downloadable!]
  5. Sujit Chakravorti, 2003. "Theory of credit card networks: a survey of the literature," Payment Cards Center Discussion Paper 03-09, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  6. Joseph Farrell, 2006. "Efficiency and Competition between Payment Instruments," Review of Network Economics, Concept Economics, vol. 5(1), pages 26-44, March. [Downloadable!]
  7. Alan S. Frankel, 2005. "Interchange fees in various countries : developments and determinants : commentary on Weiner and Wright," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 51-64. [Downloadable!]
  8. Fumiko Hayashi, 2006. "Pricing and welfare implications of payment card network competition," Payments System Research Working Paper PSR WP 06-03, Federal Reserve Bank of Kansas City. [Downloadable!]
  9. Jean-Charles Rochet & Jean Tirole, 2003. "An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems," Review of Network Economics, Concept Economics, vol. 2(2), pages 69-79, June. [Downloadable!]
  10. Julian Wright, 2004. "One-sided Logic in Two-sided Markets," Review of Network Economics, Concept Economics, vol. 3(1), pages 42-63, March. [Downloadable!]
  11. Robert M. Hunt, 2003. "An introduction to the economics of payment card networks," Working Papers 03-10, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  12. Fumiko Hayashi, 2004. "A puzzle of card payment pricing : why are merchants still accepting card payments?," Payments System Research Working Paper PSR WP 04-02, Federal Reserve Bank of Kansas City. [Downloadable!]
  13. Eric Emch & T. Scott Thompson & Bates White, LLC, 2006. "Market Definition and Market Power in Payment Card Networks," Review of Network Economics, Concept Economics, vol. 5(1), pages 45-60, March. [Downloadable!]
  14. Joshua S. Gans & Stephen P. King, 2003. "Approaches to Regulating Interchange Fees in Payment Systems," Review of Network Economics, Concept Economics, vol. 2(2), pages 125-145, June. [Downloadable!]
  15. Sandra Deungoue, 2008. "Compétition pour les paiements : une titanomachie revisitée par la modélisation multi-agents," Working Papers 0810, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure. [Downloadable!]
  16. Fumiko Hayashi, 2006. "A Puzzle of Card Payment Pricing: Why Are Merchants Still Accepting Card Payments?," Review of Network Economics, Concept Economics, vol. 5(1), pages 144-174, March. [Downloadable!]
  17. Sujit Chakravorti & Roberto Roson, 2006. "Platform Competition in Two-Sided Markets: The Case of Payment Networks," Review of Network Economics, Concept Economics, vol. 5(1), pages 118-143, March. [Downloadable!]
    Other versions:
  18. Jean-Charles Rochet, 2003. "The Theory of Interchange Fees: A Synthesis of Recent Contributions," Review of Network Economics, Concept Economics, vol. 2(2), pages 97-124, June. [Downloadable!]
  19. Bergman, Mats A., 2005. "A Welfare Ranking of Two-Sided Market Regimes," Working Paper Series 185, Sveriges Riksbank (Central Bank of Sweden), revised 01 Sep 2005. [Downloadable!]
  20. Verdier, Marianne, 2006. "Retail Payment Systems: What can we Learn from Two-Sided Markets?," MPRA Paper 2606, University Library of Munich, Germany. [Downloadable!]
  21. Milne , Alistair, 2005. "What's in it for us? Network effects and bank payment innovation," Research Discussion Papers 16/2005, Bank of Finland. [Downloadable!]
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