Why Free Markets Can Sometimes Turn into "Peacock Markets": The Evolution of Credit Cards

Joshua Frank

Journal of Economic Issues, 2010, vol. 44, issue 2, 325-336

Abstract: The credit card market has evolved into what is defined here as a "peacock market." Analogous to extravagant and inefficient male peacock displays, a "peacock market" has developed to become dominated by elaborate signals that are no longer connected in a meaningful way to price, quality, or efficiency.The focus of this analysis is on how the institutional framework of the credit card market has evolved. It is concluded that while recent and proposed regulations are beneficial, a peacock market-based strategy is already embedded in current institutional thinking and will be very difficult to reverse.

Date: 2010
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DOI: 10.2753/JEI0021-3624440205

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