Payment Card Pricing - The Relationship of Consumer Price Elasticity and Merchant Fees of Unitary Networks

Even though there has been an enormous growth of literature on two-sided markets over the last decade, there remains a significant need for a deeper understanding of the determination of (i) privately and of (ii) socially optimized payment card network pricing . Thus in this paper I explore the behavior of payment card network players. I particularly aim at unveiling the determination of payment card network fees. I thereby find three determinants of the merchant discount: 1. consumer price elasticity, 2. the relative frequency of card payments, and 3. the competitive condition of merchants