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Non-price competition in credit card markets through bundling and bank level benefits

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  • Akin, Guzin Gulsun
  • Aysan, Ahmet Faruk
  • Kara, Gazi Ishak
  • Yildiran, Levent

Abstract

The attempts to explain the high and sticky credit card rates have given rise to a vast literature on credit card markets. This paper endeavors to explain the rates in the Turkish market using measures of non-price competition. In this market, issuers compete monopolistically by differentiating their credit card products. The fact that credit cards and all other banking services are perceived as a bundle by consumers allows banks to deploy also bank level characteristics to differentiate their credit cards. Thus, credit card rates are expected to be affected by the features and service quality of banks. Panel data estimations also control for various costs associated with credit card lending. The results show significant and robust effects of the non-price competition variables on credit card rates.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17768.

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Date of creation: Jul 2008
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Handle: RePEc:pra:mprapa:17768

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Keywords: Credit Cards; Monopolistic Competition; Product Differentiation; Bundling; Bank Pricing Behavior; Regulation;

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  1. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
  2. Timothy H. Hannan, 1989. "Foundations of the structure-conduct-performance paradigm," Finance and Economics Discussion Series 83, Board of Governors of the Federal Reserve System (U.S.).
  3. Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
  4. Stango, Victor, 2002. "Pricing with Consumer Switching Costs: Evidence from the Credit Card Market," Journal of Industrial Economics, Wiley Blackwell, vol. 50(4), pages 475-92, December.
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Cited by:
  1. G. Gulsun Akin & Ahmet Faruk Aysan & Gazi Ishak Kara & Levent Yildiran, 2010. "The Failure of Price Competition in the Turkish Credit Card Market," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 46(0), pages 23-35, May.

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