Papers & reports

Pricing payment cards

Özlem Bedre-DefolieEmilio Calvano, American Economic Journal: Microeconomics 5(3): 206–231, August 2013

Payment card networks, such as Visa, require merchants’ banks to pay substantial “interchange” fees to cardholders’ banks, on a per transaction basis. This paper shows that a network’s
profi t-maximizing fee induces an ine fficient price structure, over-subsidizing card usage and over-taxing merchants.

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