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A Note on Partial Merchant Internalization and MIT Threshold

Listed author(s):
  • Vilen Lipatov

In framework of Rochet and Tirole (2011), I allow for partial merchant internalization and study how MIT threshold is related to levels of inter-change fee that maximize various components of social welfare. I find that cost absorption on the side of issuers and merchant heterogeneity each bias MIT threshold upward from TUS maximizing level.

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File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp5684.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 5684.

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Date of creation: 2015
Handle: RePEc:ces:ceswps:_5684
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  1. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
  2. Rochet, Jean-Charles & Wright, Julian, 2010. "Credit card interchange fees," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1788-1797, August.
  3. Jean‐Charles Rochet & Jean Tirole, 2011. "Must‐Take Cards: Merchant Discounts And Avoided Costs," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 462-495, 06.
  4. Börestam, Ann & Schmiedel, Heiko, 2011. "Interchange fees in card payments," Occasional Paper Series 131, European Central Bank.
  5. Wang, Zhu, 2010. "Market structure and payment card pricing: What drives the interchange?," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 86-98, January.
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