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An Empirical Analysis Of Payment Card Usage

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  • MARC RYSMAN

Abstract

I exploit a unique data set on the payment card industry to study issues associated with network effects and two‐sided markets. I show that consumers concentrate their spending on a single payment network (single‐homing), although many maintain unused cards that allow the ability to use multiple networks (multi‐homing). Further, I establish a regional correlation between consumer usage and merchant acceptance within the four major networks (Visa, Mastercard, American Express and Discover). This correlation is suggestive of the existence of a positive feedback loop between consumer usage and merchant acceptance.

Suggested Citation

  • Marc Rysman, 2007. "An Empirical Analysis Of Payment Card Usage," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 1-36, March.
  • Handle: RePEc:bla:jindec:v:55:y:2007:i:1:p:1-36
    DOI: 10.1111/j.1467-6451.2007.00301.x
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    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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