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Oligopoly Model of a Debit Card Network

Author

Listed:
  • Manchev, Peter

Abstract

The paper builds an oligopoly model of a debit card network. It examines the competition between debit card issuers. We show that there is an optimal pricing for the debit card network, which maximizes all issuer's revenues. The paper also shows that establishing a link between debit card networks averages the costs provided that there is no growth in the customer's usage of the networks, resulting from the link.

Suggested Citation

  • Manchev, Peter, 2006. "Oligopoly Model of a Debit Card Network," MPRA Paper 2460, University Library of Munich, Germany, revised 26 Feb 2007.
  • Handle: RePEc:pra:mprapa:2460
    as

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    File URL: https://mpra.ub.uni-muenchen.de/2460/1/MPRA_paper_2460.pdf
    File Function: original version
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    References listed on IDEAS

    as
    1. Rochet, Jean-Charles & Tirole, Jean, 1999. "Cooperation Among Competitors: The Economics of Credit Card Associations," CEPR Discussion Papers 2101, C.E.P.R. Discussion Papers.
    2. Fumiko Hayashi & Richard J. Sullivan & Stuart E. Weiner, 2006. "A guide to the ATM and debit card industry - 2006 update," Monograph, Federal Reserve Bank of Kansas City, number 2006agttaadci2, Jan 10.
    3. Kauko, Karlo, 2000. "The microeconomics of innovation : Oligopoly theoretic analyses with applications to banking and patenting," Scientific Monographs, Bank of Finland, number 18/2000, December.
    4. Chakravorti Sujit & Roson Roberto, 2006. "Platform Competition in Two-Sided Markets: The Case of Payment Networks," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-25, March.
    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. Sujit Chakravorti & Alpa Shah, 2001. "A study of the interrelated bilateral transactions in credit card networks," Occasional Paper; Emerging Payments EPS-2001-2, Federal Reserve Bank of Chicago.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    debit card; payment networks; switch fees; access pricing;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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