Regulation and the Market for Checks (Duzenlemeler ve Cek Piyasasi)

Semih Tumen

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper analyzes the market for checks using the monopoly problem as an approximation. The need for such an analysis arises due to the following policy proposal : the Turkish government considers increasing the lump-sum amount that drawee banks are legally responsible to pay per bad check. We show that banks will tend to restrict the quantity of checks as a response to such a policy action. We report that a percentage increase in banks' obligation per bad check could lead up to a 1.7% decline in the total supply of checks on the margin. We establish that the extent of the monopoly distortion depends on three main factors : (i) the elasticity of demand for checks, (ii) how fast the fraction of bad checks increase with the total supply of checks, and (iii) the degree of preference heterogeneity.

Keywords: Checks; regulation; monopoly power; preference heterogeneity. (search for similar items in EconPapers)
JEL-codes: D42 G28 (search for similar items in EconPapers)
Date: 2010
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https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN ... g+Paperss/2010/10-06 (application/pdf)

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Journal Article: Regulation and the market for checks (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1006

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