TY - JOUR
T1 - Cooperation among competitors
T2 - Some economics of payment card associations
AU - Rochet, Jean Charles
AU - Tirole, Jean
PY - 2002
Y1 - 2002
N2 - We analyze platforms in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative determination of the interchange fee by member banks. The interchange fee is the "access charge" paid by the merchants' banks (the acquirers) to cardholders' banks (the issuers). We develop a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card. After drawing the welfare implications of a cooperative determination of the interchange fee, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition.
AB - We analyze platforms in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative determination of the interchange fee by member banks. The interchange fee is the "access charge" paid by the merchants' banks (the acquirers) to cardholders' banks (the issuers). We develop a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card. After drawing the welfare implications of a cooperative determination of the interchange fee, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition.
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U2 - 10.2307/3087474
DO - 10.2307/3087474
M3 - Article
AN - SCOPUS:0036993844
VL - 33
SP - 549
EP - 570
JO - RAND Journal of Economics
JF - RAND Journal of Economics
SN - 0741-6261
IS - 4
ER -