This essay surveys the economic literature on interchange fees and the debate over whether interchange should be regulated and, if so, how. We consider, first, the operation of unitary payment systems, like American Express, in the context of the recent economic literature on two-sided markets,...

Intro -- Contents -- Preface -- Acknowledgments -- 1 - Plastic Cards -- 2 - From Seashells to Electrons -- 3 - More Than Money -- 4 - From Gourmets to the Masses -- 5 - From Sardi's to Saks.com -- 6 - It Takes Two to Tango -- 7 - Co-opetition and the Payment Card Ecosystem -- 8 - System Wars --...

This paper uses the standard economic framework for designing government regulations to evaluate the Federal Reserve Board's proposed cost-based price caps for debit card interchange fees. We argue that the Board has not prepared an economically sound diagnosis of the problem that it is trying...