A Note on Partial Merchant Internalization and MIT Threshold

Vilen Lipatov

No 5684, CESifo Working Paper Series from CESifo

Abstract: In framework of Rochet and Tirole (2011), I allow for partial merchant internalization and study how MIT threshold is related to levels of inter-change fee that maximize various components of social welfare. I find that cost absorption on the side of issuers and merchant heterogeneity each bias MIT threshold upward from TUS maximizing level.

Keywords: MIT; merchant internalization; payment cards; two-sided markets (search for similar items in EconPapers)
JEL-codes: E42 G28 K21 L49 (search for similar items in EconPapers)
Date: 2015
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