Elimination of Competitors: Some Economics of Payment Card Associations
AbstractThis paper analyzes platforms and rejections in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative antitrust determination of the interchange fee by member banks. We use a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card developed by Rochet and Tirole (2002). After drawing the welfare implications of a cooperative determination of the interchange fee and antitrust conducts, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0409002.
Date of creation: 06 Sep 2004
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Other versions of this item:
- Koki Arai, 2004. "Elimination of Competitors: Some Economics of Payment Card Associations," ISER Discussion Paper 0612, Institute of Social and Economic Research, Osaka University.
- L - Industrial Organization
This paper has been announced in the following NEP Reports:
- NEP-FIN-2004-09-12 (Finance)
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