Pricing Debit Card Payments Services: An IO approach
Wilko Bolt () and
WO Research Memoranda (discontinued) from Netherlands Central Bank, Research Department
In this paper we present a theoretic framework to analyse pricing structures in debit card schemes. Card-holders value debit cards only to the extent that these are accepted by retailers, while retailers in turn benefit from a widespread usage of cards. This points to the two-sided nature of the market for debit cards. In setting its prices, the network routing switch, which in our model controls the electronic debit card network and is jointly owned by the banks, needs to consider getting both the consumers' side and retailers' side on board. We show that the 'double-monopolistic' network routing switch may want to supply consumers with cheap debit cards, deriving profits from charging a high retailer fee per trans-action. This theoretic result resembles the current practice in the Netherlands where consumers pay no transaction fee for using their debit cards. Only the retailers pay such a fee. Interestingly, this 'corner' solution carries over when analysing socially optimal prices.
Keywords: Debit card payment systems; two-sided monopolistic pricing; social optimum (search for similar items in EconPapers)
JEL-codes: G21 L10 L41 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Working Paper: Pricing Debit Card Payment Services; An IO Approach (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:dnb:wormem:735
Access Statistics for this paper
More papers in WO Research Memoranda (discontinued) from Netherlands Central Bank, Research Department Contact information at EDIRC.
Series data maintained by Rob Vet ().