Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers

Posted by D. Daniel Sokol

I have found yet another interesting antitrust payment systems article.  This one is by Mats Bergman of Södertörn University College in Sweden and the Swedish Competition Authority and is titled Market Structure and Welfare in Two-Sided Payment Markets with Heterogenous and Non-Strategic Customers.

ABSTRACT: Two-sided network effects in card payment systems are analysed under different market structures, e.g., competition, one-sided monopoly, bilateral monopoly and duopoly; with and without an interchange fee; for the so-called Baxter's case of non-strategic and heterogenous merchants. A partial ranking of market structures according to their welfare effects is provided. Some support is found for the policy adopted by the EU Commission in the competition law case concerning Visa's interchange fees.