Platform Competition in Two-Sided Markets: The Case of Payment Networks

44 Pages Posted: 14 Jul 2004

See all articles by Sujit Chakravorti

Sujit Chakravorti

Independent

Roberto Roson

Ca Foscari University of Venice - Dipartimento di Economia; Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy; Loyola Andalucia University

Date Written: July 2004

Abstract

In this article, we construct a model to study competing payment networks, where networks offer differentiated products in terms of benefits to consumers and merchants. We study market equilibria for a variety of market structures: duopolistic competition and cartel, symmetric and asymmetric networks, and alternative assumptions about multihoming and consumer preferences. We find that competition unambiguously increases consumer and merchant welfare. We extend this analysis to competition among payment networks providing different payment instruments and find similar results.

Keywords: Two-sided markets, payment systems, network externalities, imperfect competition

JEL Classification: D43, G21, L13

Suggested Citation

Chakravorti, Sujit and Roson, Roberto, Platform Competition in Two-Sided Markets: The Case of Payment Networks (July 2004). FRB of Chicago Working Paper No. 2004-09. Available at SSRN: https://ssrn.com/abstract=564564 or http://dx.doi.org/10.2139/ssrn.564564

Sujit Chakravorti (Contact Author)

Independent ( email )

No Address Available

Roberto Roson

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy
+39 041 2349147 (Phone)
+39 041 2349176 (Fax)

HOME PAGE: http://venus.unive.it/roson

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy ( email )

viale Filippetti, 9
Milan, 20122
Italy

Loyola Andalucia University ( email )

Escritor Castilla Aguayo no. 4
Cordoba, CORDOBA 14004
Spain

Register to save articles to
your library

Register

Paper statistics

Downloads
974
Abstract Views
8,095
rank
22,333
PlumX Metrics