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Competing Payment Schemes

Author

Listed:
  • Graeme Guthrie

    (Victoria University of Wellington)

  • Julian Wright

    () (National University of Singapore)

Abstract

This paper presents a model of competing payment schemes. Unlike previous work on generic twosided markets, the model allows for the fact that in a payment system users on one side of the market (merchants) compete to attract users on the other side (consumers who may use cards for purchases). It analyzes how competition between card associations and between merchants affects the choice of interchange fees, and thus the structure of fees charged to cardholders and merchants. Implications for other two-sided markets are discussed.

Suggested Citation

  • Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0311
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    File URL: http://www.fas.nus.edu.sg/ecs/pub/wp/wp0311.pdf
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    References listed on IDEAS

    as
    1. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    2. Guthrie, Graeme & Wright, Julian, 2003. "Competing Payment Schemes," Working Papers 173, Department of Economics, The University of Auckland.
    3. Wright, Julian, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
    4. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
    5. Gans Joshua S & King Stephen P, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
    6. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    7. Geoffrey G. Parker & Marshall W. Van Alstyne, 2000. "Information Complements, Substitutes, and Strategic Product Design," William Davidson Institute Working Papers Series 299, William Davidson Institute at the University of Michigan.
    8. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December.
    9. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, September.
    10. Marius Schwartz & Daniel Vincent, 2002. "Same Price, Cash, or Card: Vertical Control by Payment Networks," Working Papers gueconwpa~02-02-01, Georgetown University, Department of Economics.
    11. Wright, Julian, 2003. "Pricing in debit and credit card schemes," Economics Letters, Elsevier, vol. 80(3), pages 305-309, September.
    12. Hausman, Jerry A & Leonard, Gregory K & Tirole, Jean, 2003. " On Nonexclusive Membership in Competing Joint Ventures," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 43-62, Spring.
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