Non-price competition in credit card markets through bundling and bank level benefits

Non-price competition in credit card markets through bundling and bank level benefits

Guzin Gulsun Akin (), Ahmet Faruk Aysan (), Gazi Ishak Kara and Levent Yildiran

MPRA Paper from University Library of Munich, Germany

Abstract: The attempts to explain the high and sticky credit card rates have given rise to a vast literature on credit card markets. This paper endeavors to explain the rates in the Turkish market using measures of non-price competition. In this market, issuers compete monopolistically by differentiating their credit card products. The fact that credit cards and all other banking services are perceived as a bundle by consumers allows banks to deploy also bank level characteristics to differentiate their credit cards. Thus, credit card rates are expected to be affected by the features and service quality of banks. Panel data estimations also control for various costs associated with credit card lending. The results show significant and robust effects of the non-price competition variables on credit card rates.

Keywords: Credit Cards; Monopolistic Competition; Product Differentiation; Bundling; Bank Pricing Behavior; Regulation (search for similar items in EconPapers)
JEL-codes: G2 D14 G21 (search for similar items in EconPapers)
Date: 2008-07
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