IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_796.html
   My bibliography  Save this paper

A Model of the Card Payment System and the Interchange Fee

Author

Listed:
  • Paul De Grauwe
  • Laura Rinaldi

Abstract

We analyse a card payment system to assess the economic impact of the interchange fee. This fee is paid by the bank of the merchant, the acquirer, to the bank of the consumer, the issuer. We build up a mode in order to explore whether the interchange fee can enhance the participation to the system and thus increase the benefits of the system as a whole. We also investigate what kind of incentives the interchange fee provides to the actors of the system. We show that the interchange fee selected by the card associations differs from the one that would be selected by a welfare maximising social planner. Moreover the interchange fee selected by the market is likely to produce a smaller market for cards than the socially optimal one.

Suggested Citation

  • Paul De Grauwe & Laura Rinaldi, 2002. "A Model of the Card Payment System and the Interchange Fee," CESifo Working Paper Series 796, CESifo.
    • Handle: RePEc:ces:ceswps:_796
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo_wp796.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-588, October.
    2. Bouckaert, Jan & Degryse, Hans, 2000. "Price competition between an expert and a non-expert," International Journal of Industrial Organization, Elsevier, vol. 18(6), pages 901-923, August.
    3. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521805001.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Bank of Finland Research Discussion Papers 16/2003, Bank of Finland.
    2. repec:zbw:bofrdp:2003_016 is not listed on IDEAS
    3. David S. Evans & Richard Schmalensee, 2005. "The economics of interchange fees and their regulation : an overview," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 73-120.
    4. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, University Library of Munich, Germany.
    5. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Research Discussion Papers 16/2003, Bank of Finland.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, University Library of Munich, Germany.
    2. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Bank of Finland Research Discussion Papers 16/2003, Bank of Finland.
    3. James J. McAndrews & Zhu Wang, 2008. "The economics of two-sided payment card markets: pricing, adoption and usage," Research Working Paper RWP 08-12, Federal Reserve Bank of Kansas City.
    4. Oz Shy, 2011. "A Short Survey of Network Economics," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(2), pages 119-149, March.
    5. Marc Rysman, 2007. "An Empirical Analysis Of Payment Card Usage," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 1-36, March.
    6. repec:zbw:bofrdp:2003_016 is not listed on IDEAS
    7. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Research Discussion Papers 16/2003, Bank of Finland.
    8. Khiaonarong, Tanai, 2003. "Payment systems efficiency, policy approaches, and the role of the central bank," Bank of Finland Research Discussion Papers 1/2003, Bank of Finland.
    9. Paul DiMaggio & Joseph Cohen, 2003. "Information Inequality and Network Externalities: A Comparative Study of the Diffusion of Television and the Internet," Working Papers 36, Princeton University, School of Public and International Affairs, Center for Arts and Cultural Policy Studies..
    10. Estelle Malavolti, 2016. "Single Till or Dual Till at airports: a Two-Sided Market Analysis," Post-Print hal-01406372, HAL.
    11. Chakravorti Sujit, 2003. "Theory of Credit Card Networks: A Survey of the Literature," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-19, June.
    12. Fan-Chen Tseng & Kuang-Cheng Andy Wang, 2011. "Compatibility Strategies For An Asymmetric Duopoly Considering Network Effects And Market Shares," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 8(04), pages 615-634.
    13. Davide Consoli & Pier Paolo Patrucco, 2011. "Complexity and the Coordination of Technological Knowledge: The Case of Innovation Platforms," Chapters, in: Handbook on the Economic Complexity of Technological Change, chapter 8 Edward Elgar Publishing.
    14. Dutta, Dilip & Otsuka, Kozo, 2004. "Knowledge Spillover from Information and Communication Technology: A Comparative Study of Australia, Japan, South Korea and Taiwan," Working Papers 8, University of Sydney, School of Economics.
    15. Christian Dahl Winther, 2007. "Optimal research effort and product differentiation in network industries," Economics Working Papers 2007-19, Department of Economics and Business Economics, Aarhus University.
    16. Wilko Bolt & Sujit Chakravorti, 2011. "Pricing in Retail Payment Systems: A Public Policy Perspective on Pricing of Payment Cards," DNB Working Papers 331, Netherlands Central Bank, Research Department.
    17. Slowak, André P., 2009. "Market fields structure & dynamics in industrial automation," FZID Discussion Papers 02-2009, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    18. Wilko Bolt, 2012. "Retail Payment Systems: Competition, Innovation, and Implications," DNB Working Papers 362, Netherlands Central Bank, Research Department.
    19. Johannes M. Bauer & Michael Latzer, 2016. "The economics of the Internet: an overview," Chapters, in: Johannes M. Bauer & Michael Latzer (ed.), Handbook on the Economics of the Internet, chapter 1, pages 3-20, Edward Elgar Publishing.
    20. Jean Gabszewicz & Victor Ginsburgh & Shlomo Weber, 2011. "Bilingualism and Communicative Benefits," Annals of Economics and Statistics, GENES, issue 101-102, pages 271-286.
    21. Bauer, Johannes M., 2014. "Platforms, systems competition, and innovation: Reassessing the foundations of communications policy," Telecommunications Policy, Elsevier, vol. 38(8), pages 662-673.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_796. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.