The Economics of Payment Card Fee Structures: What Drives Payment Card Rewards? Fumiko Hayashi November 2008; Revised March 2009 RWP 08-07

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1 The Econoics o Payent Card Fee tructures: What Drives Payent Card Rewards? Fuiko ayashi Noveer 008; Revised March 009 RWP 08-07

2 TE ECONOMIC OF PYMENT CRD FEE TRUCTURE: WT DRIVE PYMENT CRD REWRD? Fuiko ayashi First version: Noveer 008 This version: March 009 RWP stract: This aer investigates otential arket orces that cause ayent card rewards even when roviding ayent card rewards is not the ost eicient. Three actors oligoolistic erchants, outut-axiizing card networks, and the erchant s inaility to set dierent rices across ayent ethods ay otentially exlain the revalence o ayent card rewards rogras in the United tates today. The aer also oints out that coetition aong card networks ay otentially ake ayent rewards too generous, and thus deteriorate social welare and its distriution. The situation ay otentially warrant ulic olicy interventions. Keywords: Payent card rewards, equiliriu ee structure, oligoolistic erchants, card network coetition, no-surcharge-rules JEL Classiication: L3, L Payents yste Research Function, Econoic Research Deartent, Federal Reserve ank o Kansas City. The views exressed in this article are those o the author and do not necessarily relect those o the Federal Reserve ank o Kansas City or the Federal Reserve yste.

3 . Introduction Payent card rewards rogras have ecoe increasingly oular in the United tates. owever, roviding ayent card rewards ay not e necessarily eneicial to consuers and society as a whole. ccording to the theoretical literature on ayent card ee structure, in ost cases the ost eicient cardholder ees would e the dierence etween the card network s costs or a card transaction and the erchant s transactional eneit ro the card transaction. vailale eirical evidence suggests that in the United tates the erchant s transactional eneit ro a card transaction ay not exceed the card network s cost. This ilies roviding rewards would unlikely e the ost eicient. What drives ayent card rewards? This aer is the second o a series o three aers. The irst aer exained the otial alance etween the erchant ee and the cardholder ee ro oth eiciency and equity ersectives. In this aer, we investigate what arket orces drive ayent card rewards. The results are useul or olicyakers when deterining whether the current situation should call or ulic olicy interventions and i so what olicies are aroriate. Policy otions are considered in the third aer. The equiliriu card ee structure is greatly inluenced y any actors. This aer exaines the equiliriu ee structure under various coinations o assutions and identiies what actors otentially cause ayent card rewards. We also consider the welare consequences o equiliriu card ee structures. The results suggest three actors that together ay exlain the revalence o rewards card rogras in the United tates today. They are oligoolistic erchants, outut-axiizing card networks and the erchant s inaility to set dierent rices according to their custoers ayent ethods. Whether er transaction costs and ees are ixed ayashi 008.

4 or roortional to the transaction value ay also lay an iortant role in deterining the level o rewards. When er transaction costs and ees are roortional and the three actors entioned aove co-exist, coetition aong card networks would likely increase the level o rewards as well as the erchant ees. The higher erchant ees would result in the higher roduct rices, and as a result the equiliriu social welare would e otentially lower than the social welare without cards at all. lthough the revious studies suggested coetition in a two-sided arket ay not necessarily irove eiciency, the inding in this aer coetition in a two-sided arket ay otentially deteriorate eiciency is new in the literature and has a otentially iortant ulic olicy ilication. The rest o the aer is organized as ollows. ection constructs theoretical odels. ection 3 exaines the arket equiliriu ee structures and their welare consequences or dierent arties that are involved in ayent card arkets. ection 4 concludes.. Models We use the odels that were constructed in the irst aer ayashi, 008 as the ase odels here. We also ake additional assutions regarding erchants and card networks, which greatly aect equiliriu ee structure. This section irst recas our ase odels then akes additional assutions regarding erchants and card networks.. Reca o the ase Models The assutions coon to all odels are the ollowing. The ayent card arkets are considered to e atured. ll consuers hold at least one card and erchants accet cards as long as the erchant ees are lower than a certain threshold level, which is endogenously deterined. 3

5 Consuers are heterogeneous in their transactional eneit ro cards as oosed to the alternative ayents. consuer s transactional eneit ro a card,, consists o three arts. One is a gross eneit inus gross cost ro using a card, C ; 3 one is a gross eneit inus gross cost ro using the alternative ayent ethod, ; 4 and one is the consuer ee aid or the alternative ayent ethod,. Thus, the transactional eneit ro a card is deined as: C =. To siliy the odel, we assue every consuer receives the sae level o, which is equal to i.e., =. is assued to e distriuted over the interval, ] with a density unction o h, and a cuulative distriution unction o. [ Consuers ay the cardholder ee o when they use a card. Merchants are hoogeneous at least ex-ante and their transactional eneit ro cards,, is deined as the erchant cost or the alternative ayent ethod, ee aid or the alternative ayent ethod, C c i.e., c, lus the erchant, inus the erchant cost or a card transaction, C = c c. To siliy the odel, we assue C 0 c =. Merchants ay the erchant ee o when their custoers use a card. Merchants also incur a cost o selling one unit o goods, d. The assutions in ters o i er transaction costs and ees; ii consuer deand or goods; and iii erchant aility to set dierent rices according to the ayent ethod can vary. Per transaction costs and ees are either lat or roortional to the transaction value. Consuer deand or goods is either inelastic i.e., a consuer akes a ixed nuer o transactions or downward-sloing i.e., the nuer o transactions increases as the eective 3 Note that gross cost does not include the ees or using a card. 4 gain, gross cost does not include the ees or using the alternative ayent ethod. 4

6 rice o goods decreases. erchant either sets the sae rice or all o its custoers regardless o the ayent ethod or sets the dierent rices according to the ayent ethod its custoers use.. dditional ssutions Merchants Thus, oligoolistic erchants are ore realistic. This aer assues ologoolistic erchants coete according to the otelling odel. lthough the other odels, such as the Cournot odel, can e used to descrie oligoolistic erchants, the otelling odel is ore lexile. lthough soe erchants are ossily onoolistic, any U.. erchants are considered to e quite coetitive. owever, a erectly coetitive arket descried as the ertrand coetition unlikely relects the reality. t equiliriu under the ertrand coetition, two tyes o erchants cash-only erchants and card-acceting erchants serve the custoers searately, and ecause o the higher rice set y card-acceting erchants, only card-using consuers ake transactions at the card-acceting erchants. In reality, however, ost card-acceting erchants serve oth card-using custoers and non-card-using consuers. 5 The asic raework o the otelling odel is the ollowing: There are two erchants, Merchant and Merchant. Consuers are uniorly distriuted on the interval o [0, ], which is indeendent o their transactional eneit ro cards. Merchant is located at oint 0 and Merchant is located at oint. For the consuers located at oint x, where 0 x, the transortation cost to Merchant is tx, and the transortation cost to Merchant is t x. 5 For exale, the Cournot odel requires downward-sloing consuer deand or goods to otain equiliriu rice. 5

7 consuer located at oint x with transactional eneit ro cards chooses a erchant and a ayent ethod, which gives the consuer the lower eective rice lus transortation costs. For exale, suose a onooly card network rovides the card services, only Merchant accets the cards, and Merchant sets an identical rice or oth card-using consuers and non-card-using consuers. Merchant sets rice or their custoers. Then, the consuer s eective rice lus transortation cost is tx, when he urchases goods at Merchant with a card, tx, when he urchases goods at Merchant with an alternative ayent ethod, and t x, when he urchases goods at Merchant. uose. The consuer chooses a card at Merchant, and thereore, he coares tx and t x. I tx > t x, then he urchases goods at Merchant with an alternative ayent ethod, otherwise he urchases goods at Merchant with a card. Card networks This aer assues the card network sets oth cardholder ees rewards and erchant ees. lthough, in reality, our-arty schee card networks do not directly set erchant ees, assuing a card network sets its erchant ees is not too ar ro the reality ecause a ajor art o the erchant ee ercent is an interchange ee, alost all acquirers entirely ass through the interchange ee to erchants, and the acquirers charges to erchants in addition to the interchange ees see not to vary very uch within an industry. In contrast, assuing a card network our-arty schee sets its cardholder ees ay aear to e unrealistic. Cardholder ees, esecially credit card rewards, vary y card issuers: Large card issuers tend to rovide ore generous rewards than their saller counterarts. owever, aout 80 ercent o the total ourarty schee credit cards are issued y the to 0 card issuers. lthough it is diicult to 6

8 coare the level o rewards aong the to 0 issuers, i, as card networks and their issuers clai, they coete vigorously in the consuer-side o the ayent card arket, then the level o rewards should e very close to the dierence etween the interchange ees and the issuer s costs o rocessing a card transaction. gain, card issuers costs o rocessing a card transaction vary. ut i the to 0 issuers costs o rocessing a card transaction are siilar, then the interchange ees set y a card network greatly inluence the level o rewards on the cards issued y the to 0 issuers. There is a variety o assutions aout the ojective o ayent card networks, ut the ojective can e astracted as either roit- or outut-axiization. Proit-axiization is ovious, ut outut-axiization ay not e. When card networks coete, each card network ay reduce its arku to undercut its rival card networks until the arku reaches the reservation arku. nd the reservation arku ay otentially e very close to zero. In such a case, card networks likely ai to increase their arket share as uch as ossile. Even when card networks are onoolistic otentially collude, their ojective can e outut-axiization. In a our-arty schee card network, it is ossile that each acquirer and issuer gets a sall ixed arku. Tyically, an acquirer s arku is sall, and ecause o the intensiied coetition aong issuers, each issuer ay get a sall arku even when the card network they join is onoolistic. Coetitive card networks ehavior is likely aected y their cardholders hoing ehavior. When a cardholder holds only a single-randed card or has a strong reerence aong cards singlehoing, then each card network can set onoolistic erchant ees. In contrast, i all cardholders hold ultile cards and they are indierent aong those cards ultihoing, then card networks cannot set onoolistic erchant ees, ecause erchants ay inluence 7

9 their custoers choice o ayent ethods. In the odel, we assue that singlehoing cardholders are not sensitive to rewards when deciding which card to use, while ultihoing cardholders are very sensitive to rewards and they always choose a card with the highest level o rewards aong the cards the erchant accets. In this aer, three tyes o card networks are considered: i roit-axiizing onooly, ii outut-axiizing onooly, and iii outut-axiizing coeting networks with cardholders who are all ultihoing. lthough we do not exlicitly consider the case o outut-axiizing coeting networks with soe singlehoing cardholders, the results would e soewhere etween those o an outut-axiizing onooly network and those o oututaxiizing duooly networks with cardholders who are all ultihoing Market Equiliriu ayashi 008 exained the ost eicient ee structure under various coinations o the assutions. In ost cases, the ost eicient cardholder ee is the dierence etween the card network s costs or a ayent card transaction and the erchant transactional eneit ro the card transaction. This ilies that unless the erchant transactional eneit ro a card exceeds the card network s costs o rocessing a card transaction, roviding ayent card rewards to consuers is less eicient. ccording to the availale cost studies in the United tates, the erchant transactional eneit ro a card ay not e higher than the card network s costs. 7 Nevertheless, ayent card rewards rogras are revalent in the United tates. This section exaines the equiliriu ee structures and their inluence on the welare o dierent arties, such as card-using consuers, non-card-using consuers, erchants, and 6 Outut-axiizing networks ay have a ositive reservation arku er transaction; however, this section assues the arku is zero i.e., the roit o outut-axiizing network is zero or silicity. 7 These cost studies are Garcia-wartz et. al. 006, Food Marketing Institute 998, and tar Network 006, 007. ee also ayashi 008 or ore detailed discussion. 8

10 ayent card networks and their eer inancial institutions. The ain urose o this exercise is to ind out what arket orces ay otentially drive ayent card rewards. The results ay also e useul or ulic olicy consideration: For exale, does encouraging coetition aong card networks reduce the level o ayent card rewards? Does regulatory intervention that aolishes the no-surcharge rules irove social welare? This section looks at our actors that ay signiicantly aect the equiliriu ee structures. The irst actor is coetition aong card networks and their ojectives. s entioned aove three tyes o card networks are considered. The second actor is consuer deand or goods. Consuer deand or goods is assued to e either inelastic or downward-sloing. When a consuer s deand or good is inelastic, the consuer would ake a ixed nuer o transactions regardless o the rice o goods or ees charged or each transaction. When a consuer s deand or goods increases as the eective rice o goods i.e., su o the rice o goods and the cardholder ee er transaction decreases, the consuer would ake ore transactions as the eective rice o goods decreases. The third actor relates to er transaction costs and ees or given ayent ethods. Per transaction costs and ees are assued to e either ixed regardless o the transaction value or roortional to the transaction value. Many revious studies assued that er transaction costs and ees are ixed. In reality, however, esecially in the United tates, erchants ay roortional ees or card transactions and consuers receive rewards that are roortional to the urchase value. ccording to the availale cost studies, costs o handling a cash transaction and a credit card transaction increase as the transaction value increases. Finally, the ourth actor is aout the erchant s aility to set dierent rices according to their custoers ayent ethods. Currently in the United tates, ost erchants set the sae 9

11 rice or all o their custoers regardless o their ayent ethods. ut in the other countries, such as ustralia and Netherlands, any erchants set dierent rices according to their custoers ayent ethods. The dierence etween these countries and the United tates is caused y card networks rules. In the United tates, ajor card networks have a rule that does not allow erchants to or akes erchants diicult set dierent rices according to ayent ethods, while in ustralia or Netherlands they do not. Esecially in ustralia, the Reserve ank o ustralia rohiits the card networks ro iosing such a rule. This section irst considers the case where erchants set the sae rice or all o their custoers regardless o their ayent ethods no-discriinatory ricing. There are our ossile scenarios deending on the assutions regarding consuer deand and er transaction costs and ees. The irst scenario is where consuer deand is ixed and er transaction costs and ees are ixed cenario I. The second scenario is where consuer deand is ixed ut er transaction costs and ees are roortional to the transaction value cenario II. The third scenario is where a consuer deand unction is downward-sloing and er transaction costs and ees are ixed cenario III. nd the ourth scenario is where a consuer deand unction is downward-sloing and er transaction costs and ees are roortional to the transaction value cenario IV. Excet or cenario I, analytical solutions or equiliriu ee structure cannot e otained. For cenarios II and III, nuerical exales can e used to characterize the equiliriu ee structure. Thereore, this section only considers cenarios I, II and III. In each scenario, three tyes o card networks i roit-axiizing onooly, ii outut-axiizing onooly, and iii outut-axiizing coeting networks with cardholders who are all ultihoing are considered. 0

12 This section then considers the case where erchants set the dierent rices according to their custoers ayent ethods discriinatory ricing. iilar to the case o nondiscriinatory ricing, analytical solution is otainale only or cenario I. Nuerical exales can e used or cenario II. Thus, only two scenarios are considered in this case. ecause tedious calculations are required to otain arket equiliriu ee structures under various coinations o assutions, the elow suarizes the results. Detailed calculations are in the endix. 3. Market Equiliriu under No-discriinatory Pricing Tales and suarize the equiliriu ee structure and the welare consequences, resectively, when erchants set the sae rice or card-using consuers and consuers who use an alternative ayent ethod. There are several key oservations. First, in all three scenarios, a roit-axiizing onooly network would set the ost eicient cardholder ees. This ilies that i roviding rewards to card-using consuers is not the ost eicient, then the roit-axiizing onooly network would not rovide rewards. owever, this does not necessarily ily that social welare is axiized under a roitaxiizing card network. Excet or cenario I, social welare is also aected y the roduct rice, which is aected y the erchant ee. The erchant ee set y the roit-axiizing onooly network is higher than the erchant s transactional eneit ro cards, which ilies the erchant ee is not necessarily at the ost eicient level. s a result, with roit-axiizing onooly networks, social welare ay not e reached at the axiu level excet or cenario I. econd, in all three scenarios, an outut-axiizing onooly network would set cardholder ees lower than the ost eicient cardholder ees. This ilies that even when

13 roviding rewards is not the ost eicient, the outut-axiizing onooly network would likely rovide rewards to card-using consuers. ecause the highest erchant ee the onooly network can set increases as the cardholder ee decreases or the level o rewards increases, the erchant ee set y the outut-axiizing onooly network is higher than that set y the roit-axiizing onooly network. s a result, the equiliriu roduct rices set under the outut-axiizing onooly network are higher than those set under the roit-axiizing onooly network. ocial welare under the outut-axiizing onooly network is also lower than that under the roit-axiizing onooly network. Third, whether coeting card networks would set their cardholder ees at the ost eicient level deends on two actors. One is cardholders hoing ehavior and the other is the nature o er transaction costs and ees. When all cardholders are singlehoing either they have only one card or they have a strong reerence and cardholder ees do not aect their card choice, coeting card networks can act like an outut-axiizing onooly network. When all cardholders are ultihoing i.e., they have ultile networks cards and are indierent aong cards as long as the cardholder ees are the sae, the equiliriu cardholder ee deends on whether er transaction costs and ees are ixed cenario I or roortional to the transaction value cenario II. I the orer is the case, the coeting card networks would set their cardholder ee at the ost eicient level and their erchant ee at the erchant s transactional eneit. This is ecause oligoolistically coeting erchants would only accet the cards with the lower erchant ee. I the latter is the case, the coeting card networks would set their cardholder ees as low as ossile. s a result, the erchant ees can e higher than the ees set y onooly card networks. In this case, two tyes o erchants would co-exist ex-ost: One tye o erchants would accet the cards with the lower erchant ee only, while the other tye

14 o erchants would accet oth networks cards. In act, the card network with the higher erchant ee thus the lower cardholder ees would have ore transactions than its rival card network. Knowing at least soe erchants would accet oth cards, card networks would not lower their erchant ees. Rather, they would raise erchant ees and lower cardholder ees in order to increase their card transactions. 8 Thus, coetition aong card networks would likely increase the equiliriu erchant ee and the level o ayent card rewards. Fourth, related to the revious oservations, whether er transaction costs and ees are ixed cenario I and III or roortional to the transaction value cenario II would signiicantly aect social welare. I the orer is the case, social welare with cards is always at least the sae as social welare without cards. While erchant roits are not aected y coetition aong card networks and their ojectives, the surlus o consuers as a whole is higher when card networks are coeting cenario I. In contrast, i the latter is the case cenario II, social welare with cards is not always higher than or the sae as social welare without cards. ocial welare under roit-axiizing onooly network is always higher than social welare without cards, while social welare under outut-axiizing onooly or coetitive card networks could e higher or lower than social welare without cards. It deends on actors, such as card networks costs o rocessing a card transaction, erchants transactional eneit ro cards, and consuers transactional eneits ro cards. Consuer surlus could e higher under outut-axiizing card networks than under roit-axiizing card networks. Network coetition ay irove erchant surlus ut it does not irove consuer surlus; rather in soe cases it deteriorates consuer surlus. 8 The card network can increase its erchant ee until one tye o erchants would ecoe ore roitale y rejecting oth cards than rejecting the cards with the higher erchant ees, given the other tye o erchants would accet oth networks cards. 3

15 3. Market Equiliriu under Discriinatory Pricing Tales 3 and 4 suarize the equiliriu ee structure and the welare consequences, resectively, when erchants set dierent rices or card-using consuers and consuers who use an alternative ayent ethod. There are our key oservations. First, under cenario I, where er transaction costs and ees are ixed regardless o the transaction value, a card ee structure has no eect on the nuer o card transactions, rather the su o the two ees the erchant ee and cardholder ee aects the nuer o card transaction. 9 In this case, the card networks would not have an incentive to rovide rewards. In contrast, under cenario II, where er transaction costs and ees are roortional to the transaction value, a card ee structure still aects the nuer o card transactions. It is likely that the lower the erchant ees the ore the nuer o card transactions. Thus, a card network that axiizes its outut would increase the cardholder ee rather than roviding rewards to card users. Even a card network that axiizes its roit would increase the cardholder ee i ore transactions are roitale than higher arkus er transaction. econd, coetition aong card networks would unlikely inluence the equiliriu ee structure. Under cenario I, since the su o the two ees deterines the nuer o card transactions, a card network that axiizes its outut sets the su o the two ees at the card network s costs o rocessing a transaction, regardless o whether it is onooly or coeting. Coetition would unlikely inluence the equiliriu ee structure under cenario II, either. Coeting card networks would not set their erchant ees lower than the ee set y the oututaxiizing onooly network ecause it would set its erchant ee as low as ossile in the realistic range o the erchant ees. 0 9 This is consistent with the neutrality o interchange ees ound in Gans and all ee endix. 4

16 Third, in contrast to the case where erchants set the sae rices or all their custoers, the ee structure set y a roit-axiizing onooly network would not lead to the ost eicient nuer o card transactions; rather, it leads to a ewer nuer o card transactions. The ee structure set y an outut-axiizing card network would lead to the ost eicient nuer o card transactions under cenario I and it would lead the nuer o card transactions that is ore eicient than that the nuer o card transactions with a roit-axiizing card network under cenario II. Fourth, related to the third oservation, social welare is higher with outut-axiizing networks than with a roit-axiizing onooly network. Nevertheless, even a roitaxiizing onooly network iroves social welare ro that without cards at all. This ilies social welare with cards is always higher than social welare without cards. 3.3 Factors that Drives Payent Card Rewards The oservations in the revious susections suggest three otential arket orces that together ay drive ayent card rewards. The irst is oligoolistic erchants, the second is the erchant s inaility to set dierent rices across ayent ethods, and the third is oututaxiizing card networks. s entioned, erchants are unlikely erectly coetitive, ut soe erchants ay e onoolistic at least locally. aving rewards at equiliriu with onoolistic erchants is ossile ut in rather liited circustances. In contrast, rewards can exist with oligoolistic erchants in uch roader circustances, as has een shown in the susection 3.. It is easy to show that roviding rewards is unlikely to e at equiliriu when erchants are onoolistic and consuers ake a ixed nuer o transactions. In this case, onoolistic erchants would not accet cards i the erchant ee exceeds their transactional eneit, and thus card networks cannot rovide rewards without incurring losses. When a consuer s deand unction or goods is downward-sloing, the equiliriu cardholder ee ay otentially e negative. In this case, onoolistic erchants would accet the cards even when the erchant ee exceeds their transactional eneit ecause acceting the cards ay induce a consuer deand curve shit uwards. 5

17 s has een shown in the susection 3., when erchants set dierent rices according to their custoers ayent ethods, card networks do not have an incentive to rovide rewards cenario I or card networks have an incentive to set their erchant ees as low as ossile and thus, they set their cardholder ees higher cenario II. Thereore, i erchants are allowed to set dierent rices across ayent ethods and they actually do, then ayent card rewards are less likely to exist at equiliriu. Outut-axiizing card networks are ore likely to rovide rewards than roitaxiizing card networks. When erchants are oligoolistic and set the sae rice regardless o their custoers ayent ethods, a roit-axiizing onooly card network would not set rewards level that is higher than the ost eicient level, while an outut-axiizing onooly network or outut-axiizing coeting network would set rewards level that is higher than the ost eicient level. The oservations also suggest that the rewards level could e higher under coetitive card networks and as a result, eiciency could e deteriorated in soe circustances. The revious literature on two-sided arkets suggests that coetition in a two-sided arket does not necessarily irove eiciency ut ew studies suggested that coetition in a two-sided arket ay deteriorate eiciency. In the context o the ayent card arket, Guthrie and Wright 007 ound that coetition aong ayent card networks would not irove eiciency when all cardholders are singlehoing, while it would irove eiciency as ore cardholders ecoe ultihoing. The results in this aer are consistent with their results ecause Guthrie and Wright assued er transaction costs and ees are ixed. owever, when er transaction costs and ees are roortional to the transaction value, coetition aong card networks would not irove eiciency even i all cardholders are ultihoing; rather, it would 6

18 otentially deteriorate eiciency. In this sense, the aer akes a contriution to the literature y showing a otential negative eect o coetition on eiciency in a two-sided arket. 4. Conclusion This aer investigated what arket orces drive ayent card rewards, when roviding rewards ay not e the ost eicient. The aer identiied three actors that together ay exlain the revalence o rewards rogras in the United tates today. They are oututaxiizing card networks, oligoolistic erchants and the erchant s inaility to set dierent rices across ayent ethods. Existence o these three actors in the U.. ayent card arket is quite lausile. lthough whether er transaction costs and ees are roortional to the transaction value is an eirical question, the theoretical odels suggest that when er transaction costs and ees are roortional to the transaction value, the equiliriu social welare would otentially e lower than the social welare without cards at all. Consuers as a whole and erchants would e worse o, coared with the econoy without cards at all. This ay warrant ulic olicy interventions. In this case, enhancing coetition aong card networks would not irove eiciency ut would otentially deteriorate eiciency. The equiliriu ee structures and their welare consequences ay e useul or olicyakers when they consider olicy otions. 7

19 Reerences rstrong, Mark Coetition in Two-ided Markets, RND Journal o Econoics, 373: axter, Willia ank Interchange o Transactional Paer: Legal Persectives, Journal o Law and Econoics, 6: Food Marketing Institute EP Costs: Retailers Guide to Electronic Payent ystes Costs. Gans, Joshua and tehan King The Neutrality o Interchange Fees in Payent ystes, The.E. Journal o Econoic nalysis & Policy, 3: -6. Garcia-wartz, Daniel, Roert ahn, and nne Layne-Farrar. 006a. The Move Toward a Cashless ociety: Closer Look at Payent Instruent Econoics, Review o Network Econoics. 5: Garcia-wartz, Daniel, Roert ahn, and nne Layne-Farrar The Move Toward a Cashless ociety: Calculating the Costs and eneits, Review o Network Econoics. 5: Governent ccountaility Oice Credit and Deit Cards. Federal Entities re Taking ctions to Liit Their Interchange Fees, ut dditional Revenue Collection Cost avings May Exist, GO Guthrie, Graee and Julian Wright Coeting Payent chees, Journal o Industrial Econoics, 55: ayashi, Fuiko. 006a. Puzzle o Card Payent Pricing: Why re Merchants till cceting Card Payents? Review o Network Econoics, 5 : ayashi, Fuiko Pricing and Welare Ilications o Payent Card Network Coetition, Payents yste Research, Federal Reserve ank o Kansas City Working Paer ayashi, Fuiko The Econoics o Interchange Fees and Payent Card Fee tructure: What is the Otial alance etween Merchant Fee and Payent Card Rewards? Econoic Research, Federal Reserve ank o Kansas City Working Paer Katz, Michael. 00. Reor o Credit Card chees in ustralia II. Reserve ank o ustralia: ydney. Mcndrews, Jaes and Zhu Wang Micro oundations o Two-sided Markets: The Payent Card Exale, Federal Reserve ank o Kansas City Working Paer

20 Rochet, Jean-Charles Coeting Payent ystes: Key Insights Fro the cadeic Literature, Reserve ank o ustralia, Proceedings o Payents yste Review Conerence, 5-8. Rochet, Jean-Charles and Jean Tirole. 00. Cooeration aong Coetitors: oe Econoics o Payent Card ssociations, Rand Journal o Econoics, 334: Rochet, Jean-Charles and Jean Tirole Plator Coetition in Two-ided Markets, Journal o Euroean Econoic ssociation, 4: Rochet, Jean-Charles and Jean Tirole Two-ided Markets: Progress Reort, RND Journal o Econoics, 373: Rysan, Marc n Eirical nalysis o Payent Card Usage, Journal o Industrial Econoics, 55: -36. chalensee, Richard. 00. Payent ystes and Interchange Fees, Journal o Industrial Econoics, 50: 03-. ies, Lancy, and arer 006 Costs and eneits o lternative Payents Instruents in ustlaria, Melourne usiness chool Working Paer No 8. nyder, Chris and Jonathan Zinan Consuer oing on Payent Cards: Fro Theory to Measureent, ieo. Visa U Visa Payent Panel tudy. Wright, Julian. 003 Otial Card Payent ystes, Euroean Econoic Review, 47: Wright, Julian The Deterinant o Otial Interchange Fees in Payent ystes, Journal o Industrial Econoics, 5: -6. 9

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