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Oligopoly Model of a Debit Card Network

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  • Manchev, Peter

Abstract

The paper builds an oligopoly model of a debit card network. It examines the competition between debit card issuers. We show that there is an optimal pricing for the debit card network, which maximizes all issuer's revenues. The paper also shows that establishing a link between debit card networks averages the costs provided that there is no growth in the customer's usage of the networks, resulting from the link.

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File URL: http://mpra.ub.uni-muenchen.de/2460/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2460.

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Date of creation: 28 Jul 2006
Date of revision: 26 Feb 2007
Handle: RePEc:pra:mprapa:2460

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Keywords: debit card; payment networks; switch fees; access pricing;

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References

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  1. Kauko, Karlo, 2000. "The Microeconomics of Innovation: Oligopoly Theoretic Analyses with Applications to Banking and Patenting," Scientific Monographs E:18/2000, Bank of Finland.
  2. repec:fth:bfsefi:e18 is not listed on IDEAS
  3. 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.
  4. Sujit Chakravorti & Alpa Shah, 2001. "A Study of the Interrelated Bilateral Transactions in Credit Card Networks," Law and Economics 0111001, EconWPA.
  5. Fumiko Hayashi & Rick Sullivan & Stuart E. Weiner, 2006. "A guide to the ATM and debit card industry - 2006 update," Monograph, Federal Reserve Bank of Kansas City, number 2006agttaadci2.
  6. 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, vol. 3(1), pages 1-18, January.
  7. Rochet, Jean Charles & Tirole, Jean, 1999. "Cooperation Among Competitors: The Economics of Credit Card Associations," CEPR Discussion Papers 2101, C.E.P.R. Discussion Papers.
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