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The Adoption Process of Payment Cards -An Agent- Based Approach

Author

Listed:
  • Biliana Alexandrova-Kabadjova
  • Sara Gabriela Castellanos Pascacio
  • Alma L. García-Almanza

Abstract

We investigate the payment card's adoption rate under consumers' and merchants' awareness of network externalities, given two levels of Interchange Fees in a multiagent card market. For the purpose of our research, in multiple instances of the model (scenarios) the investigated effects are analyzed over the complete process of adoption, until the market's saturation point is achieved. For each scenario, a comparison is made between two different levels of Interchange Fees and different degrees of consumers' and merchants' awareness. We model explicitly the interactions between consumers and merchants at the point of sale. We allow card issuers to charge consumers with fixed fees and provide net benefits from card usage, whereas acquirers can charge fixed and transactional fees to merchants.

Suggested Citation

  • Biliana Alexandrova-Kabadjova & Sara Gabriela Castellanos Pascacio & Alma L. García-Almanza, 2012. "The Adoption Process of Payment Cards -An Agent- Based Approach," Working Papers 2012-02, Banco de México.
  • Handle: RePEc:bdm:wpaper:2012-02
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    References listed on IDEAS

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    1. D. COLANDER & al., 2010. "The Financial Crisis and the Systemic Failure of Academic Economics," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
    2. anonymous, 2008. "Federal Reserve Bank of Kansas City: 2007 annual report," TEN, Federal Reserve Bank of Kansas City, pages 37-81.
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    4. LeBaron, Blake, 2000. "Agent-based computational finance: Suggested readings and early research," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 679-702, June.
    5. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    6. Evans, David & Schmalensee, Richard, 2005. "The Economics of Interchange Fees and Their Regulation: An Overview," Working papers 18181, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. LeBaron, Blake, 2006. "Agent-based Computational Finance," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 24, pages 1187-1233 Elsevier.
    8. Chakravorti Sujit, 2003. "Theory of Credit Card Networks: A Survey of the Literature," Review of Network Economics, De Gruyter, pages 1-19.
    9. Alan Kirman, 2010. "The Economic Crisis is a Crisis for Economic Theory ," CESifo Economic Studies, CESifo, vol. 56(4), pages 498-535, December.
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    12. Chakravorti, Sujit & To, Ted, 2007. "A theory of credit cards," International Journal of Industrial Organization, Elsevier, pages 583-595.
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    Cited by:

    1. Angel De la Fuente, 2013. "La evolucion de la financiacion de las comunidades autonomas de regimen comun, 2002-2011," Working Papers 1332, BBVA Bank, Economic Research Department.
    2. Javier Alonso & Maria Lamuedra & David Tuesta, 2013. "Potentiality of reverse mortgages to supplement pension: the case of Chile," Working Papers 1311, BBVA Bank, Economic Research Department.
    3. Tatiana Alonso & Javier Alonso & Santiago Fernandez de Lis & Cristina Rohde & David Tuesta, 2013. "Global Financial Regulatory Trends and Challenges for Insurance and Pensions," Working Papers 1321, BBVA Bank, Economic Research Department.
    4. Javier Alonso & Tatiana Alonso & Santiago Fernandez de Lis & Cristina Rohde & David Tuesta, 2013. "Tendencias regulatorias financieras globales y retos para las Pensiones y Seguros," Working Papers 1323, BBVA Bank, Economic Research Department.

    More about this item

    Keywords

    Two-sided markets; financial services; network formation.;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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