Credit card interchange fees
We build a model of credit card pricing that explicitly takes into account credit functionality. We show that a monopoly card network always selects an interchange fee that exceeds the level that maximizes consumer surplus. If regulators only care about consumer surplus, a conservative regulatory approach is to cap interchange fees based on retailers’ net avoided costs from not having to provide credit themselves. In the model, this always raises consumer surplus compared to the unregulated outcome, sometimes to the point of maximizing consumer surplus.
Year of publication: |
2009
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Authors: | Rochet, Jean-Charles ; Wright, Julian |
Publisher: |
Frankfurt a. M. : European Central Bank (ECB) |
Subject: | Kreditkarte | Bankentgelt | Monopol | Anreizregulierung | Konsumentenrente | Theorie | credit card networks | credit card pricing | interchange fees |
Saved in:
freely available
Series: | ECB Working Paper ; 1138 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 62737347X [GVK] hdl:10419/153572 [Handle] RePEc:ecb:ecbwps:20091138 [RePEc] |
Source: |
Persistent link: https://www.econbiz.de/10011605184