The Role of Merchants' Pass-Through in Payment Platform Markets
47 Pages Posted: 10 Dec 2014 Last revised: 12 Jan 2016
Date Written: January 12, 2016
In this article, we analyze a general model of a payment card platform. We relax the standard assumption of the literature that the product market is covered. We show that the difference between the privately set structure of payment card fees and the socially optimal one depends both on banks' and merchants' pass-through of their costs to consumers.
Keywords: Interchange fees, Payment Systems, Two-Sided Markets
JEL Classification: E42, L1, O33
Suggested Citation: Suggested Citation