Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, February 22, 2012

Pricing in Retail Payment Systems: A Public Policy Perspective on Pricing of Payment Cards

Posted by D. Daniel Sokol

Wilko Bolt (De Nederlandsche Bank) and Sujit Chakravorti (De Nederlandsche Bank) address Pricing in Retail Payment Systems: A Public Policy Perspective on Pricing of Payment Cards.

ABSTRACT: The provision of retail payment services is complex with many participants engaging in a series of interrelated bilateral transactions and subject to large economies of scale and scope along with strong adoption, usage and network externalities. This makes sound public policy difficult. We focus on three types of market interventions for various countries. We argue that intervention into payment markets should concentrate on the removal of entry barriers in payment markets and providing greater incentives to adopt efficient payment instruments without stifling private sector investment in more efficient payment technologies over the long term. While the theoretical literature on the economics of payment cards is growing, the empirical literature is yet too limited to provide much guidance to public authorities. Eventually, the outcomes from different types of market interventions will provide a useful “natural experime! nt” to refute or validate the various theories of the economics of payments.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/02/pricing-in-retail-payment-systems-a-public-policy-perspective-on-pricing-of-payment-cards-1.html

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