We evaluate the competitive and governance effects of "duality." Duality refers to the joint membership (e.g., by banks) in competing associations or joint ventures (e.g., Visa and MasterCard). We first show that the not-for-profit nature of the associations along with the usage-based fees they charge yield productive efficiency. We then analyze the impact of(i) membership exclusivity, when the associations remain not-for-profit, and (ii) the conversion into for-profit systems. We illustrate the results in the case of a double-differentiation model that is of independent interest. Finally, we discuss extensions to (i) endogenous system differentiation, and (ii) agency considerations.
ASJC Scopus subject areas
- Economics and Econometrics