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Title:Payment Card Network Pricing - A Theoretical Approach Analyzing the Relationship between Downstream Market Characteristics and the Merchant Usage Fee PDF Logo
Authors:Langlet, Markus
Issue Date:29-Mar-2011
Abstract:In this thesis the model of a payment card network is constructed to explore the impact of downstream market characteristics (i.e., the market where merchants and consumers interact) on the merchant and the interchange fee, thereby extending the literature’s observations of payment systems. To accomplish this, three scenarios are analyzed: firstly, a unitary payment card network with merchants under Cournot quantity competition and, secondly, under Bertrand price competition respectively, as well as, thirdly, a multi-party payment card network with merchants under Cournot quantity competition. This study yields two significant results. Firstly, the merchant and the interchange fee are found decreasing in the consumer price elasticity, the level of product substitutability and the relative frequency of card usage. Secondly, regulating the interchange fee and the merchant fee respectively is found particularly useful since, in markets with less competition where consumers already face inefficiently high prices, the payment card fees will also tend to be higher.
Subjects:Two-sided markets
Payment card networks
Platform pricing
Bertrand competition
Industrial Organization
Cournot competition
JEL:D53
G21
L11
L4
Additional Information:zugl. Dissertation, EBS Universität für Wirtschaft und Recht, Wiesbaden
Document Type:Doctoral Thesis
Appears in Collections:Theses / Qualifikationsschriften, EconStor Direct

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