Microfoundations of two-sided markets: the payment card example

James McAndrews and Zhu Wang

No PSR WP 06-01, Payments System Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: This paper provides a theory of two-sided market dynamics with arguably better microfoundations. These alternative microfoundations focus on observable heterogeneities of both sides of the market in a competitive framework. The theory is rich in empirical predictions and is less dependent on a particular form of imperfect competition than other approaches. Our findings in the payment card example point to adoption costs and the distribution of consumer incomes and firm sizes as the key determinants of the shares of costs borne by each side. This result provides clear implications for industry dynamics and sheds light on the puzzle of asymmetric pricing. ; Previous title: Payment industry dynamics: a two-sided market approach

Date: 2006
New Economics Papers: this item is included in nep-bec, nep-com, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.kansascityfed.org/publicat/psr/rwp/PaymentDynamics.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.kansascityfed.org/publicat/psr/rwp/PaymentDynamics.pdf [301 Moved Permanently]--> https://www.kansascityfed.org/publicat/psr/rwp/PaymentDynamics.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedkpw:psrwp06-01

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Payments System Research Working Paper from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens ().