Cost efficiency in the retail payment networks: first evidence from the Italian credit card system
In this paper, a parametric cost frontier for the credit card market is specified (ï¿½stochastic frontier approachï¿½ - SFA) and robustness checks of the main results are performed. The aim is to provide some clues to: the x-inefficiency problem and determinants in a retail payment circuit; the main technical characteristics of the industry (i.e. scale economies, cost structure, factor substitution); policy implications. The Italian case study indicates that: the credit card industry could benefit from significant increasing returns to scale, but bigger the network (in terms of transactions handled) the more intermediaries tend to veer away from their efficient cost frontier. Moreover, the cost structure borne by firms is strongly dependent on intra-network agreements. Possible solutions to the x-inefficiency problem might come from the ï¿½theory of incentivesï¿½, which provides pricing (or cost recovery) mechanisms computed on the basis of costs expected under efficiency conditions; however, more studies are needed to investigate the topic within the context of ï¿½selfregulatedï¿½ payment networks.
|Date of creation:||Jun 2003|
|Contact details of provider:|| Postal: Via Nazionale, 91 - 00184 Roma|
Web page: http://www.bancaditalia.it
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schmidt, Peter, 1976. "On the Statistical Estimation of Parametric Frontier Production Functions," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 238-239, May.
- Bauer, Paul W & Ferrier, Gary D, 1996.
"Scale Economies, Cost Efficiencies, and Technological Change in Federal Reserve Payments Processing,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 28(4), pages 1004-1039, November.
- Paul W. Bauer & Gary D. Ferrier, 1996. "Scale economies, cost efficiencies, and technological change in Federal Reserve payments processing," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 1004-1044.
- Massimiliano Piacenza, 2002. "Regulatory Constraints and Cost Efficiency of the Italian Public Transit Systems: An Exploratory Stochastic Frontier Model," CERIS Working Paper 200202, Institute for Economic Research on Firms and Growth - Moncalieri (TO) -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO).
- DeYoung, Robert, 1996. "Comment on Scale Economies, Cost Efficiencies, and Technological Change in Federal Reserve Payments Processing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 1040-1044, November.
- Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999.
"The consolidation of the financial services industry: Causes, consequences, and implications for the future,"
Journal of Banking & Finance,
Elsevier, vol. 23(2-4), pages 135-194, February.
- Allen N. Berger & Rebecca Demsetz & Philip E. Strahan, 1998. "The consolidation of the financial services industry: causes, consequences, and implications for the future," Finance and Economics Discussion Series 1998-46, Board of Governors of the Federal Reserve System (U.S.).
- Ferrier, Gary D. & Lovell, C. A. Knox, 1990. "Measuring cost efficiency in banking : Econometric and linear programming evidence," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 229-245.
- Afriat, Sidney N, 1972. "Efficiency Estimation of Production Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(3), pages 568-598, October.
- William C. Horrace & Peter Schmidt, 2002. "Confidence Statements for Efficiency Estimates from Stochastic Frontier Models," Econometrics 0206006, EconWPA.
- Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-888, September.
- 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.
- Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181.
- Stigler, George J, 1976. "The Xistence of X-Efficiency," American Economic Review, American Economic Association, vol. 66(1), pages 213-216, March.
- Kumbhakar, Subal C., 1990. "Production frontiers, panel data, and time-varying technical inefficiency," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 201-211.
- Paolo Angelini & Paolo Del Giovane & Stefano Siviero & Daniele Terlizzese, 2002. "Monetary Policy Rules for the Euro Area: What Role for National Information?," Temi di discussione (Economic working papers) 457, Bank of Italy, Economic Research and International Relations Area.
- Philippe Gagnepain & Marc Ivaldi, 2002.
"Stochastic Frontiers and Asymmetric Information Models,"
Journal of Productivity Analysis,
Springer, vol. 18(2), pages 145-159, September.
- Philippe Gagnepain & Marc Ivaldi, 2002. "Stochastic Frontiers and Asymmetric Information Models," Post-Print hal-00622849, HAL.
- Gagnepain, P. & Ivaldi, M., 1998. "Stochastic Frontiers and Asymmetric Information Models," Papers 98.503, Toulouse - GREMAQ.
- Kulasekaran, Sivakumar & Shaffer, Sherrill, 2002. "Cost efficiency among credit card banks," Journal of Economics and Business, Elsevier, vol. 54(6), pages 595-614.
- THIRY, Bernard & TULKENS, Henry, 1988. "Allowing for technical inefficiency in parametric estimates of production functions with an application to urban transit firms," CORE Discussion Papers 1988041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Humphrey, David Burras, 1981. "Economies to scale in federal reserve check processing operations," Journal of Econometrics, Elsevier, vol. 15(1), pages 155-173, January.
- Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
- David B. Humphrey, 1994. "Delivering deposit services: ATMs versus branches," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 59-81.
- Paul W. Bauer & Diana Hancock, 1995. "Scale economies and technological change in Federal Reserve ACH payment processing," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 14-29.
- Walker, David A., 1978. "Economies of scale in electronic funds transfer systems," Journal of Banking & Finance, Elsevier, vol. 2(1), pages 65-78, June.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, September.
When requesting a correction, please mention this item's handle: RePEc:bdi:wptemi:td_480_03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.