Some Antitrust Foundations of Payment Card Associations
In this study we analyze platforms and rejections in two-sided markets with network externalities, using the specific context of a payment card association. We look at the cooperative antitrust determination of the interchange fee by member banks, using 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 developed by Rochet and Tirole (2002). After showing the welfare implications of a cooperative determination of the interchange fee and antitrust conduct, 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.
Law and Economics
Date of this Version
Koki Arai, "Some Antitrust Foundations of Payment Card Associations" (August 18, 2004). bepress Legal Series. bepress Legal Series.Working Paper 409.