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The break of brand exclusivity in Brazilian credit card acquiring: effects and markup-cost decomposition in a price dispersion setting

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  • Gabriel Garber
  • Márcio Issao Nakane

Abstract

Visanet monopolized Visa merchant acquiring activities in Brazil while Redecard did the same for MasterCard, until the industry was under authorities’ scrutiny and exclusivity was broken in mid-2010. In this paper, we perform two main tasks. First, we use the knowledge of part of the marginal cost specific to this industry (the interchange fee) to identify markup and marginal cost using individual merchant data. Then, we use this framework to evaluate the impact of the change of the environment on these price components. We find sizable reduction in markup as a result of increased competition.

Suggested Citation

  • Gabriel Garber & Márcio Issao Nakane, 2015. "The break of brand exclusivity in Brazilian credit card acquiring: effects and markup-cost decomposition in a price dispersion setting," Working Papers, Department of Economics 2015_16, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2015wpecon16
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    References listed on IDEAS

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    Cited by:

    1. Escobar Elexpuru, Gonzalo & Valdés de la Fuente, Iván, 2022. "Equilibrio en un mercado oligopólico con una firma dominante en el mercado de las tarjetas de pago [Equilibrium in an oligopoly market with a dominant firm in the payment card market]," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 33(1), pages 74-92, June.
    2. Bejar, Pablo & Ishi, Kotaro & Komatsuzaki, Takuji & Shibata, Ippei & Sin, Jasmin & Tambunlertchai, Suchanan, 2022. "Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean?," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 3(2).
    3. Azevedo, Paulo F. & Ribeiro, Paulo & Rodrigues, Gabriela, 2019. "Credit portability and spreads: Evidence in the Brazilian market," Journal of Economics and Business, Elsevier, vol. 106(C).

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    More about this item

    Keywords

    Credit cards; two-sided markets; price discrimination;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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