Elimination of Competitors: Some Economics of Payment Card Associations

Koki Arai

Industrial Organization from EconWPA

Abstract: This paper analyzes platforms and rejections in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative antitrust determination of the interchange fee by member banks. We use a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card developed by Rochet and Tirole (2002). After drawing the welfare implications of a cooperative determination of the interchange fee and antitrust conducts, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition.

JEL-codes: L (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin
Date: 2004-09-06
Note: Type of Document - pdf

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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0409002

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