Fraud, Investments and Liability Regimes in Payment Platforms

54 Pages Posted: 5 Nov 2011

See all articles by Anna Creti

Anna Creti

Université Paris Ouest - Nanterre, La Défense - EconomiX; Ecole Polytechnique, Paris - Laboratoire d'Econometrie

Marianne Verdier

Université Paris 2 Panthéon Assas

Multiple version iconThere are 2 versions of this paper

Date Written: September 23, 2011

Abstract

In this paper, we discuss how fraud liability regimes impact the price structure that is chosen by a monopolistic payment platform, in a setting where merchants can invest in fraud detection technologies. We show that liability allocation rules distort the price structure charged by platforms or banks to consumers and merchants with respect to a case where such a responsibility regime is not implemented. We determine the allocation of fraud losses between the payment platform and the merchants that maximises the platform's profit and we compare it to the allocation that maximises social welfare.

Keywords: Payment card systems, interchange fees, two-sided markets, fraud, liability

JEL Classification: G21, L31, L42

Suggested Citation

Creti, Anna and Verdier, Marianne, Fraud, Investments and Liability Regimes in Payment Platforms (September 23, 2011). ECB Working Paper No. 1390. Available at SSRN: https://ssrn.com/abstract=1932650

Anna Creti (Contact Author)

Université Paris Ouest - Nanterre, La Défense - EconomiX ( email )

200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000
France

Ecole Polytechnique, Paris - Laboratoire d'Econometrie ( email )

1 rue Descartes
Paris, 75005
France

Marianne Verdier

Université Paris 2 Panthéon Assas ( email )

France

Register to save articles to
your library

Register

Paper statistics

Downloads
31
Abstract Views
259
PlumX Metrics