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Author: | Wright, J. |
Title: | The determinants of optimal interchange fees in payment systems |
Journal: | Journal of Industrial Economics
2004 : MAR, VOL. 52:1, p. 1-26 |
Index terms: | Payment systems |
Freeterms: | Interchange fees |
Language: | eng |
Abstract: | A model of a card payment system is presented as a two-sided market that allows for partial participation by heterogenous consumers and merchants. The model is used to characterize the optimal structure of fees between those charged to cardholders and those charged to merchants and, more specifically, the level of the interchange fee that banks charge each other. The model takes into account the strategic effects arising from competition between merchants. |
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