December 1, 2010
Non-Price Competition in Credit Card Markets Through Bundling and Bank Level Benefits
Posted by D. Daniel Sokol
G. Gulsun Akin (Bogazici University), Ahmet Faruk Aysan, Gazi Ishak Kara and Levent Yildiran discuss Non-Price Competition in Credit Card Markets Through Bundling and Bank Level Benefits.
ABSTRACT: Attempts to explain high and sticky credit card rates have given rise to a vast literature on credit card markets. This paper endeavors to explain the rates in the Turkish market using measures of non-price competition. In this market, issuers compete monopolistically by differentiating their credit card products. The fact that credit cards and all other banking services are perceived as a bundle by consumers allows banks to deploy also bank level characteristics to differentiate their credit cards. Thus, credit card rates are expected to be affected by the features and service quality of banks. Panel data estimations also control various costs associated with credit card lending. The results show significant and robust effects of the non-price competition variables on credit card rates.
December 1, 2010 | Permalink
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