Underlying Incentives in Credit Card Networks

Posted: 29 Feb 2004

Abstract

During the last decade, U.S. consumers tripled their use of credit cards as more merchants have increased their acceptance of them. This increase suggests that incentives in today's marketplace favor greater credit card use by consumers and acceptance by merchants. In this paper, we study the set of interrelated bilateral transactions in credit card networks. First, we explore each of these interrelated transactions emphasizing common market practices and the underlying regulatory and legal framework. Second, we survey the recent theoretical papers using this approach and find that there is a lack of consensus regarding the optimal set of pricing decisions. Third, we discuss two recent antitrust cases against the two largest credit card associations.

Suggested Citation

Chakravorti, Sujit and Shah, Alpa, Underlying Incentives in Credit Card Networks. Antitrust Bulletin, pp. 53-75, Spring 2003. Available at SSRN: https://ssrn.com/abstract=510386

Sujit Chakravorti (Contact Author)

Independent ( email )

No Address Available

Alpa Shah

Independent ( email )

No Address Available

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