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Platform competition in two-sided markets: the case of payment networks

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  • Sujit Chakravorti
  • Roberto Roson

Abstract

In this article, we construct a model to study competing payment networks, where networks offer differentiated products in terms of benefits to consumers and merchants. We study market equilibria for a variety of market structures: duopolistic competition and cartel, symmetric and asymmetric networks, and alternative assumptions about multihoming and consumer preferences. We find that competition unambiguously increases consumer and merchant welfare. We extend this analysis to competition among payment networks providing different payment instruments and find similar results.

Suggested Citation

  • Sujit Chakravorti & Roberto Roson, 2004. "Platform competition in two-sided markets: the case of payment networks," Working Paper Series WP-04-09, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-04-09
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    References listed on IDEAS

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    Keywords

    Payment systems; Competition;

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