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An Empirical Analysis of Payment Card Usage

Author

Listed:
  • Marc Rysman

    (Department of Economics, Boston University)

Abstract

This paper exploits a unique data set on the payment card industry to study issues associated with network effects and two-sided markets. We 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, we 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, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
    • Handle: RePEc:bos:wpaper:wp2006-002
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    payment cards; two-sided markets; network effects;
    All these keywords.

    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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