Market Structure and Credit Card Pricing: What Drives the Interchange?
نویسندگان
چکیده
This paper presents a model for the credit card industry, where oligopolistic card networks price their products in a complex marketplace with competing payment instruments, rational consumers/merchants, and competitive card issuers/acquirers. The analysis suggests that card networks demand higher interchange fees to maximize card issuers’ profits as card payments become more efficient. At equilibrium, consumer rewards and card transaction volumes increase with interchange fees, while consumer surplus and merchant profits do not. The model provides a unified framework to evaluate credit card industry performance and policy interventions. JEL classification: D40; L10; L40
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