Who pays for credit cards?
We model side payments in a competitive credit-card market. If competitive retailers charge a single (higher) price to cover the cost of accepting cards, banks must subsidize convenience users to prevent them from defecting to merchants who do not accept cards. The side payments will be financed by card users who roll over balances at interest if their subjective discount rates are high enough. Despite the feasibility of cross subsidies among cardholders, price discrimination without side payments is Pareto preferred because of the costliness of the card network--unless banks have other motives, such as purchasing options on future borrowing by convenience users.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834|
Web page: http://www.chicagofed.org/
More information through EDIRC
|Order Information:|| Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm Email: |
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.:
- Paul S. Calem & Loretta J. Mester, 1995.
"Consumer behavior and the stickiness of credit card interest rates,"
95-10, Federal Reserve Bank of Philadelphia.
- Calem, Paul S & Mester, Loretta J, 1995. "Consumer Behavior and the Stickiness of Credit-Card Interest Rates," American Economic Review, American Economic Association, vol. 85(5), pages 1327-36, December.
- Paul S. Calem & Loretta J. Mester, . "Consumer Behavior and the Stickiness of CreditCard Interest Rates," Rodney L. White Center for Financial Research Working Papers 3-94, Wharton School Rodney L. White Center for Financial Research.
- Paul S. Calem & Loretta J. Mester, . "Consumer Behavior and the Stickiness of CreditCard Interest Rates," Rodney L. White Center for Financial Research Working Papers 03-94, Wharton School Rodney L. White Center for Financial Research.
- Paul S. Calem & Loretta J. Mester, 1994. "Consumer Behavior and the Stickiness of Credit Card Interest Rates," Center for Financial Institutions Working Papers 94-14, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
- Kitch, Edmund W, 1990. "The Framing Hypothesis: Is It Supported by Credit Card Issuer Opposition to a Surcharge on a Cash Price?," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(1), pages 217-33, Spring.
- Kirstin E. Wells, 1996. "Are checks overused?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-12.
- Joanna Stavins, 1996. "Can demand elasticities explain sticky credit card rates?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 43-54.
- 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 541-88, October.
- Flint Brayton & Eileen Mauskopf & David L. Reifschneider & Peter A. Tinsley & John Williams, 1997. "The role of expectations in the FRB/US macroeconomic model," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 227-245.
- Hester, Donald D, 1972. "Monetary Policy in the 'Checkless' Economy," Journal of Finance, American Finance Association, vol. 27(2), pages 279-93, May.
- JOHN M. Barron & MICHAEL E. Staten & JOHN Umbeck, 1992. "Discounts For Cash In Retail Gasoline Marketing," Contemporary Economic Policy, Western Economic Association International, vol. 10(4), pages 89-102, October.
- Brito, Dagobert L & Hartley, Peter R, 1995. "Consumer Rationality and Credit Cards," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 400-433, April.
When requesting a correction, please mention this item's handle: RePEc:fip:fedhop:eps-2001-1. 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: (Bernie Flores)
If references are entirely missing, you can add them using this form.