Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers

Bergman, Mats

doi:10.2139/ssrn.943377

Abstract

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Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers

Mats Bergman

Södertörn University, Stockholm

November 8, 2006

Riksbank Research Paper No. 21
Sveriges Riksbank Working Paper No. 185

Abstract:
Two-sided network effects in card payment systems are analysed under different market structures, e.g., competition, one-sided monopoly, bilateral monopoly and duopoly; with and without an interchange fee; for the so-called Baxter's case of non-strategic and heterogenous merchants. A partial ranking of market structures according to their welfare effects is provided. Some support is found for the policy adopted by the EU Commission in the competition law case concerning Visa's interchange fees.

Number of Pages in PDF File: 32

Keywords: Two-sided markets, card payments, payment systems, acquiring, issuing, market structure

JEL Classification: G21, L11, L44

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Date posted: November 9, 2006

Suggested Citation

Bergman, Mats A., Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers (November 8, 2006). Riksbank Research Paper No. 21; Sveriges Riksbank Working Paper No. 185 . Available at SSRN: http://ssrn.com/abstract=943377 or http://dx.doi.org/10.2139/ssrn.943377

Contact Information

Mats A. Bergman (Contact Author)

Södertörn University, Stockholm ( email )

Alfred Nobels allé 7, Flemingsberg
Stockholm, 14189
Sweden