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Network externalities: the catch-22 of retail payments innovations

Author

Listed:
  • William P. Osterberg
  • James B. Thomson

Abstract

An investigation of one of the reasons why electronic payments have not yet supplanted cash and checks in retail transactions: Consumers willingness to use an innovation depends on the number of merchants who have already adopted it, and merchants willingness to invest in the innovation depends on the number of consumers who are already using it.

Suggested Citation

  • William P. Osterberg & James B. Thomson, 1998. "Network externalities: the catch-22 of retail payments innovations," Economic Commentary, Federal Reserve Bank of Cleveland, issue Feb.
  • Handle: RePEc:fip:fedcec:y:1998:i:feb15
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    Citations

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    Cited by:

    1. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Research Discussion Papers 16/2003, Bank of Finland.
    2. 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.
    3. Joanna Stavins, 2002. "Effect of consumer characteristics on the use of payment instruments," New England Economic Review, Federal Reserve Bank of Boston, issue Q 3, pages 19-31.
    4. Sujit Chakravorti & Alpa Shah, 2001. "A study of the interrelated bilateral transactions in credit card networks," Occasional Paper; Emerging Payments EPS-2001-2, Federal Reserve Bank of Chicago.
    5. Helmi Hamdi, 2007. "Some Ambiguities Concerning the Development of Electronic Money," Financial Theory and Practice, Institute of Public Finance, vol. 31(3), pages 293-307.
    6. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, EconWPA.

    More about this item

    Keywords

    Payment systems ; Smart cards;

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