Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152941
Authors: 
Holthausen, Cornelia
Rochet, Jean-Charles
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 507
Abstract: 
We study optimal pricing rules for a public large-value payment system (LVPS) that produces a public good (like prevention of systemic risk) but faces competition by a private LVPS for the private provision of large value payments. We show that the marginal cost of the public LVPS has to be corrected by a "public good factor"that can be interpreted alternatively as the decrease in the cost of providing the public good when the private activity of the public system increases, or as the subsidy needed for private banks to internalize the cost of systemic risk. In either interpretation, the public good factor is easy to measure: it corresponds to the subsidy needed for private banks to allocate their payments in the way that is desired by banking authorities.
Subjects: 
large-value payment systems
pricing rules
public goods
JEL: 
G28
H41
Document Type: 
Working Paper

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