Two-sided network effects in card payment systems are analysed under different market structures, e.g., competition, one-sided monopoly, bilateral monopoly and duopoly; with and without an interchange fee; for the so-called Baxter s case of non-strategic merchants. A partial ranking of market...

We analyze the impact of interchange fees on consumers' and merchants' incentives to adopt an innovative payment instrument, in a setting where there are adoption externalities between consumers and merchants. We show that consumer adoption decreases with the interchange fee for high degrees of...