Two-sided Market, R&D and Payments System Evolution

Zhu Wang
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Zhu Wang: Federal Reserve Bank of Richmond

No 833, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: It takes many years for more efficient electronic payments to be widely used, and the fees that merchants (consumers) pay for using those services are increasing (decreasing) over time. We address these puzzles by studying payments system evolution with a dynamic model in a two-sided market setting. We calibrate the model to the U.S. payment card data, and conduct welfare and policy analysis. Our analysis shows that the market power of electronic payment networks plays important roles in explaining the slow adoption and asymmetric price changes, and the welfare impact of regulations may vary significantly through the endogenous R&D channel.

Date: 2019
New Economics Papers: this item is included in nep-com and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:833

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