This paper provides a new theory for two-sided payment card markets. Adopting payment cards requires consumers and merchants to pay a fixed cost, but yields a lower marginal cost of making payments. Analyzing adoption and usage externalities among heterogeneous consumers and merchants, our...

Despite the growing importance of the debit card in most developed countries, there are relatively few academic studies that analyze the impact of such evolution on the demand for cash. Beyond data availability, this research is complicated by the fact that the debit card provides two services...