 Pricing Debit Card Payment Services: An IO ApproachAlexander Tieman and Wilko Bolt () No 2003/202, IMF Working Papers from International Monetary Fund Abstract: This paper presents a theoretical framework for analyzing pricing structures in debit card schemes featuring cardholders, retailers, their respective banks, and a network routing switch. The network routing switch controls the electronic debit card network and is jointly owned by the banks. In setting its prices, it needs to consider getting both consumers and retailers to participate in the market. In this two-sided market for debit cards, 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 transaction. This theoretic result resembles the current practice in the Netherlands where consumers pay no transaction fee, but retailers do. This corner solution carries over when we analyze socially optimal pricing. Keywords: WP; debit card; Debit card payment systems; two-sided monopolistic pricing; social optimum; benefit level; consumer demand; corner solution; retailer fee; payment service; consumer participation; payment network; consumer fee; bank R; monopoly price; price elasticity of demand; Payment systems; Demand elasticity; Price elasticity; Competition; Public expenditure review; Global (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2003/202 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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