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Credit Card Payment Processing in Electronic Commerce: An Analysis of the Bucket Pricing Strategy

Author

Listed:
  • Yoris A. Au

    (The University of Texas at San Antonio)

Abstract

Credit cards have been the dominant payment method for the electronic commerce retail industry. However, online retailers, especially the small to medium ones, continue to be disadvantaged by the seemingly arbitrary bucket pricing strategy implemented by the credit card processing companies. We address the following research question: “Can the credit card processors continue to economically justify the use of bucket pricing structure, especially considering the increased competition within the industry and from competing payment alternatives?” We use an economic model as a basis of our analyses and discussions.

Suggested Citation

  • Yoris A. Au, 2009. "Credit Card Payment Processing in Electronic Commerce: An Analysis of the Bucket Pricing Strategy," Working Papers 0091, College of Business, University of Texas at San Antonio.
  • Handle: RePEc:tsa:wpaper:00119is
    as

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    File URL: http://interim.business.utsa.edu/wps/IS/0091IS-296-2009.pdf
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    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
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    3. Nobuhiro Suzuki & Harry M. Kaiser & John E. Lenz & Olan D. Forker & Kohei Kobayashi, 1994. "Evaluating Generic Milk Promotion Effectiveness with an Imperfect Competition Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(2), pages 296-302.
    4. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 493-510.
    5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    6. David Zilberman, 1997. "Allocation and Pricing at the Water District Level," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 952-963.
    7. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Credit card payments; credit card processing; bucket pricing; tiered pricing; electronic commerce; online retailers.;

    JEL classification:

    • M15 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - IT Management

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