We evaluate the effects of ring-fencing on lending market competition, and thereby on banks' risk-taking as well as taxpayers' risk exposure. We show analytically that strong ring-fencing intensifies lending market competition, reduces bank profits, and increases borrower and consumer surplus...

A number of countries have implemented faster payment services that allow consumers and businesses to rapidly transfer money between bank accounts. These services compete with slower, existing payment services. In 2008, the United Kingdom implemented its Faster Payments Service (FPS) at a cost...

This short article provides formulae for computing the undercut-proof equilibrium prices in a differentiated products industry with any finite number of firms. The formulae are very simple and can be easily implemented with a typical spreadsheet to solve for the unique equilibrium prices

This study demonstrates a substantial inefficiency in the banking industry resulting from allowing banks to maintain less than a one-hundred percent reserve requirement, thereby exposing depositors to unwanted risks such as investment risks as well as bank runs and bank crises (e.g., the crisis...

This study evaluates the effects of institutional investors' common ownership of firms competing in the same market. Overall, common ownership has two opposing effects: (a) it serves as a device for weakening market competition, and (b) it induces diversification, thereby reducing portfolio...

he law permits employers to pay tipped employees below the full minimum wage. I investigate a policy whereby income collected from tips is replaced by a higher minimum wage for tipped employees. In a fully-served market, this transition makes both employers and servers better off while consumers...

In October 2011, new rules governing debit card interchange fees became effective in the United States. These rules limit the maximum permissible interchange fee that an issuer can charge merchants for a debit card transaction. Using new data from the Boston Fed's 2012 Diary of Consumer Payment...

Twenty six percent of all payments and forty seven percent of payments below $10 in the U.S. are made with cash. Using consumer transaction diary data, this article quantifies the burden from paying with cash by computing lower bounds on the number of currency notes and coins exchanged in each...

This paper introduces cashless stores and cashless consumers into a model of interchange fees. Under this modification, the interchange fee set by the card organization exceeds the optimal level. Furthermore, the gap between this fee and the optimal fee increases with the fraction of consumers...