Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers
Södertörn University, Stockholm
November 8, 2006
Riksbank Research Paper No. 21
Sveriges Riksbank Working Paper No. 185
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
Date posted: November 9, 2006
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