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Externalities in Payment Card Networks: Theory and Evidence

Author

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  • Chakravorti Sujit

    (Federal Reserve Bank of Chicago)

Abstract

Payment cards continue to replace cash and checks in advanced economies. Along with the growth of payment card transactions has come greater scrutiny by public authorities of certain payment network rules along with the level of certain fees. This article reviews the growing payment card literature and discusses the impact of several regulatory interventions on card adoption, usage, and social welfare.

Suggested Citation

  • Chakravorti Sujit, 2010. "Externalities in Payment Card Networks: Theory and Evidence," Review of Network Economics, De Gruyter, vol. 9(2), pages 1-28, June.
    • Handle: RePEc:bpj:rneart:v:9:y:2010:i:2:n:3
    DOI: 10.2202/1446-9022.1199
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    Citations

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    Cited by:

    1. Jonker Nicole, 2011. "Card Acceptance and Surcharging: the Role of Costs and Competition," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-35, June.
    2. Lotz, Sébastien & Zhang, Cathy, 2016. "Money and credit as means of payment: A new monetarist approach," Journal of Economic Theory, Elsevier, vol. 164(C), pages 68-100.
    3. Marc Bourreau & Marianne Verdier, 2019. "Interchange Fees and Innovation in Payment Systems," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 54(1), pages 129-158, February.
    4. Anna Creti & Marianne Verdier, 2011. "Fraud, Investments and Liability Regimes in Payment Platforms," Working Papers hal-04140951, HAL.
    5. Agur, Itai & Ari, Anil & Dell’Ariccia, Giovanni, 2022. "Designing central bank digital currencies," Journal of Monetary Economics, Elsevier, vol. 125(C), pages 62-79.
    6. Carbó-Valverde Santiago & Liñares-Zegarra José Manuel & Rodríguez-Fernández Francisco, 2012. "Feedback Loop Effects in Payment Card Markets: Empirical Evidence," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-24, June.
    7. Sumit Agarwal & Sujit Chakravorti & Anna Lunn, 2010. "Why do banks reward their customers to use their credit cards?," Working Paper Series WP-2010-19, Federal Reserve Bank of Chicago.
    8. Egor Krivosheya & Polina Belyakova, 2019. "Financial innovations role in consumer behavior at Russian retail payments market," Proceedings of Economics and Finance Conferences 9511955, International Institute of Social and Economic Sciences.
    9. Anneke Kosse & David-Jan Jansen, 2011. "Choosing how to pay: the influence of home country habits," DNB Working Papers 328, Netherlands Central Bank, Research Department.
    10. Alma L. Garcia-Almanza & Biliana Alexandrova-Kabadjova & Sara G. Castellanos Pascacio, 2012. "The Adoption Process of Payment Cards -An Agent- Based Approach," Working Papers 1213, BBVA Bank, Economic Research Department.
    11. Henriques David, 2018. "Cards on the Table: Efficiency and Welfare Effects of the No-Surcharge Rule," Review of Network Economics, De Gruyter, vol. 17(1), pages 25-50, March.
    12. Ewerhart, Christian & Li, Sheng, 2023. "Imposing Choice on the Uninformed: The Case of Dynamic Currency Conversion," Journal of Banking & Finance, Elsevier, vol. 154(C).
    13. Biliana Alexandrova-Kabadjova & Alma L. Garcia-Almanza & Sara G. Castellanos Pascacio, 2012. "El proceso de adopcion de tarjetas de pago: un enfoque basado en agentes," Working Papers 1214, BBVA Bank, Economic Research Department.
    14. Lee, Manjong, 2014. "Constrained or unconstrained price for debit card payment?," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 53-65.
    15. Nicholas Economides & David Henriques, 2011. "To Surcharge or Not To Surcharge? A Two-Sided Market Perspective of the No-Surcharge Rule," Working Papers 11-03, NET Institute.
    16. Mariotto Carlotta & Verdier Marianne, 2017. "Who Pays for Card Payments? A General Model on the Role of Interchange Fees," Review of Network Economics, De Gruyter, vol. 16(3), pages 307-349, September.
    17. Henriques, David, 2018. "Cards on the table: efficiency and welfare effects of the no-surcharge rule," LSE Research Online Documents on Economics 90664, London School of Economics and Political Science, LSE Library.
    18. Creti, Anna & Verdier, Marianne, 2014. "Fraud, investments and liability regimes in payment platforms," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 84-93.
    19. Frans Saxén, 2014. "The No Surcharge Rule and Merchant Competition," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 39-66, March.
    20. 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.
    21. Scott Schuh & Oz Shy & Joanna Stavins & Robert K. Triest, 2011. "An economic analysis of the 2010 proposed settlement between the Department of Justice and credit card networks," Public Policy Discussion Paper 11-4, Federal Reserve Bank of Boston.
    22. Anna Creti & Marianne Verdier, 2011. "Fraud, Investments and Liability Regimes in Payment Platforms," EconomiX Working Papers 2011-31, University of Paris Nanterre, EconomiX.
    23. Christian Ewerhart & Sheng Li, 2020. "Imposing choice on the uninformed: the case of dynamic currency conversion," ECON - Working Papers 345, Department of Economics - University of Zurich, revised May 2023.
    24. Michal Polasik, 2015. "The Potential for Development of Mobile Payments and mPOS Usage on the Polish Market: Empirical Results (Potencjal rozwoju platnosci mobilnych i zastosowania mPOS na rynku polskim. Wyniki badan empiry," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 13(54), pages 65-84.
    25. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.

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