Market Definition and Market Power in Payment Card Networks: Some Comments and Considerations

18 Pages Posted: 6 Mar 2006

See all articles by Lawrence J. White

Lawrence J. White

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics

Date Written: January 1, 2006

Abstract

Antitrust and regulatory concerns continue to swirl around the payment cards industry, for understandable reasons: The industry is clearly not atomistic in structure; it has substantial network characteristics and thus embodies network externalities; it involves two-sided markets; and its two most prominent members - Visa and MasterCard - are network joint ventures of the banks that issue credit and debit cards to individual cardholders and that enroll (acquire) and service the merchants who accept those cards.

These characteristics raise the possibility that the industry may not be fully competitive - that market power may currently be present and/or may prospectively be created or enhanced as a consequence of a merger - and thus raise potential policy concerns. But these same characteristics also cloud the standard against which the performance of the industry should be judged. And they complicate the analysis that is necessary to form judgments.

This essay attempts to clarify some of these issues while exploring the same themes as does Emch and Thompson (2006): market definition, market power, and payment card networks.

Keywords: Antitrust, regulation, market definition, market power, mergers, monopolization, payment networks

JEL Classification: L14, L41, L43

Suggested Citation

White, Lawrence J., Market Definition and Market Power in Payment Card Networks: Some Comments and Considerations (January 1, 2006). Available at SSRN: https://ssrn.com/abstract=887506 or http://dx.doi.org/10.2139/ssrn.887506

Lawrence J. White (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business, Department of Economics ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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