Erschienen in:Telecom Paris Economics and Social Sciences Working Paper ; No. ESS-06-14
Umfang:
1 Online-Ressource (38 p)
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Nicht zu entscheiden
DOI:
10.2139/ssrn.942992
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Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 2006 erstellt
Beschreibung:
In this paper, I analyse the optimal interchange fee in a payment card system where two monopoly banks have the possibility to invest in quality to raise the transaction volume. I model quality as a sum of specific investments from the cardholder's bank (the Issuer) and the merchant's bank (the Acquirer), and I assume that investments impact differently the consumer and the merchant side. If the level of quality is exogenous, I prove that it is optimal for the payment platform to set an interchange fee equal to the Acquirer's margin. I extend Baxter (1983)'s model by proving that the optimal interchange fee depends on the level of quality of the payment system. However, if banks have the possibility to invest in quality, and if the perception of quality improvements is higher on the consumer side, the optimal interchange fee can be lower than the Acquirer's margin. This is because the interchange fee and the Acquirer's investments are strategic substitutes. If investments impact relatively more the merchant side, the optimal interchange fee remains equal to the Acquirer's margin