We analyse a card payment system to assess the economic impact of the interchange fee. This fee is paid by the bank of the merchant, the acquirer, to the bank of the consumer, the issuer. We build up a mode in order to explore whether the interchange fee can enhance the participation to the...

A number of jurisdictions are considering imposing price caps on the interchange fees that card issuers receive from merchant acquirers when cardholders pay with their cards. Several have already done so. This paper examines the net impact of these price caps on consumers. The economics of...

Payment networks typically differentiate their interchange fees (IFs) by setting a variety of sector-specific IFs for the same payment card. While the previous literature on IFs has focussed on the optimal level of IFs, this paper addresses the optimal structure of IFs, i.e. whether or not IF...

Ronald Coase famously argued that “if an economist finds something – a business practice of one sort or other – that he does not understand, he looks for a monopoly explanation”. So it is with credit card interchange fees. Intellectual confusion has led to the phenomenon of interchange...

The impact that the level of interchange fees has on the payment adoption rate in a non-saturated market is investigated. This study is performed under different degrees of consumers' and merchants' awareness of the benefits arriving from the network externalities. In a four-party scheme, we...

I extend Shy and Wang's (2011) model and study the problem of successive monopoly when complementarity is imperfect. In my model, consumers value the good no matter they pay in cash or by card. However, they are willing to pay a higher price if they can enjoy additional card service. Since...

This paper examines regulator concerns that cash-paying consumers pay higher retail prices due to so-called ‘negative pricing' of credit cards that emerge when cardholders face few fees but instead receive discounts, rewards and other inducements for using credit cards for transactions. It is...