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Efficient pricing of large value interbank payment systems

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  • Holthausen, Cornelia
  • Rochet, Jean-Charles

Abstract

This paper studies the efficient pricing of large-value payment systems in the presence of unobservable heterogeneity about banks' future payment volumes. It is shown that the optimal pricing scheme for a public monopoly system involves quantity discounts in the form of a decreasing marginal fee. This is also true when the public system competes with a provate system characterized by a lower marginal cost. However in this case, optimal marginal fees in the public system are lower than its marginal cost, and fixed fees have to be levied. We also study the case of competition between several public systems. The structure of the optimal tariff depends on the willigness of Central Banks to allow by-pass. JEL Classification: G28, E58, D42, D43

Suggested Citation

  • Holthausen, Cornelia & Rochet, Jean-Charles, 2002. "Efficient pricing of large value interbank payment systems," Working Paper Series 184, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2002184
    Note: 253388
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    Cited by:

    1. Wilko Bolt & David B. Humphrey, 2005. "Public Good Aspects of TARGET: Natural Monopoly, Scale Economies, and Cost Allocation," DNB Working Papers 036, Netherlands Central Bank, Research Department.
    2. Craig, Ben & Fecht, Falko, 2011. "Substitution between net and gross settlement systems: A concern for financial stability?," Discussion Paper Series 1: Economic Studies 2011,16, Deutsche Bundesbank.
    3. Bolt, Wilko & Humphrey, David, 2005. "Public good issues in TARGET: natural monopoly, scale economies, network effects and cost allocation," Working Paper Series 505, European Central Bank.
    4. Morten L. Bech & Christine Preisig & Kimmo Soramaki, 2008. "Global trends in large-value payments," Economic Policy Review, Federal Reserve Bank of New York, vol. 14(Sep), pages 59-81.
    5. Jonathan Chiu & Alexandra Lai, 2007. "Modelling Payments Systems: A Review of the Literature," Staff Working Papers 07-28, Bank of Canada.
    6. Krahnen, Jan Pieter, 2018. "Über Scheinriesen: Was TARGET-Salden tatsächlich bedeuten. Eine finanzökonomische Überprüfung," SAFE White Paper Series 56, Leibniz Institute for Financial Research SAFE.
    7. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, University Library of Munich, Germany.
    8. Kemppainen, Kari, 2003. "Competition and regulation in European retail payment systems," Research Discussion Papers 16/2003, Bank of Finland.
    9. Tore Nilssen, 2011. "Risk externalities in a payments oligopoly," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(3), pages 211-234, December.

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    More about this item

    Keywords

    mixed duopoly; non-linear pricing; payment systems; public monopoly;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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