scholarly journals Market Definition and Market Power in Payment Card Networks: Some Comments and Considerations

2006 ◽  
Vol 5 (1) ◽  
Author(s):  
Lawrence J. White
Keyword(s):  
Market Power ◽  
Joint Ventures ◽  
Market Definition ◽  
Payment Card ◽  
Network Characteristics ◽  
Payment Cards ◽  
Two Sided Markets

Antitrust and regulatory concerns swirl around the payment cards industry, for understandable reasons: It is not atomistic; it has network characteristics; it involves two-sided markets; and its two prominent members – Visa and MasterCard – are network joint ventures of the banks that issue cards to consumers and enroll and service the merchants who accept those cards. These characteristics raise the possibility that the industry may not be fully competitive and thus raise potential policy concerns. But these same characteristics also cloud the standard against which the performance of the industry should be judged and complicate the analysis necessary for forming judgments.

scholarly journals The Economics of Two-Sided Markets

2009 ◽  
Vol 23 (3) ◽  
pp. 125-143 ◽  
Author(s):  
Marc Rysman
Keyword(s):  
Public Policy ◽  
Operating Systems ◽  
Video Game ◽  
Regulatory Policy ◽  
Consumer Electronics ◽  
The Other ◽  
Payment Card ◽  
Payment Cards ◽  
Game Developers ◽  
Two Sided Markets

Broadly speaking, a two-sided market is one in which 1) two sets of agents interact through an intermediary or platform, and 2) the decisions of each set of agents affects the outcomes of the other set of agents, typically through an externality. In the case of a video game system, the intermediary is the console producer—Sony in the scenario above—while the two sets of agents are consumers and video game developers. Neither consumers nor game developers will be interested in the PlayStation if the other party is not. Similarly, a successful payment card requires both consumer usage and merchant acceptance, where both consumers and merchants value each others' participation. Many more products fit into this paradigm, such as search engines, newspapers, and almost any advertiser-supported media (examples in which consumers typically negatively value, rather than positively value, the participation of the other side), as well as most software or title-based operating systems and consumer electronics. This paper seeks to explain what two-sided markets are and why they interest economists. I discuss the strategies that firms typically consider, and I highlight a number of puzzling outcomes from the perspective of the economics of two-sided markets. Finally, I consider the implications for public policy, particularly antitrust and regulatory policy, where there have been a number of recent issues involving media, computer operating systems, and payment cards.

scholarly journals Pricing Payment Cards

2013 ◽  
Vol 5 (3) ◽  
pp. 206-231 ◽  
Author(s):  
Özlem Bedre-Defolie ◽  
Emilio Calvano
Keyword(s):  
Payment Card ◽  
Price Structure ◽  
Interchange Fees ◽  
Extensive And Intensive Margins ◽  
Payment Cards ◽  
Profit Maximizing ◽  
Two Sided Markets

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 profit-maximizing fee induces an inefficient price structure, oversubsidizing card usage and overtaxing merchants. We show that this distortion is systematic and arises from the fact that consumers make two distinct decisions (membership and usage), whereas merchants make only one (membership). In general, we contribute to the theory of two-sided markets by introducing a model that distinguishes between extensive and intensive margins, thereby explaining why two-part tariffs are useful pricing tools for platforms. (JEL D42, D85, G21, L12)

Market Definition and Market Power in Payment Card Networks

2006 ◽  
Vol 5 (1) ◽  
Author(s):  
Eric Emch ◽  
T. Scott Thompson
Keyword(s):  
Market Power ◽  
Market Definition ◽  
Basic Logic ◽  
Payment Card

We discuss competition among payment card networks, and in particular how antitrust practitioners might approach questions of market definition and market power in these markets. Application of the hypothetical monopolist test to define markets, and the use of traditional metrics to measure market power, may be less straightforward for card networks than for many markets. The "two-sidedness" of the market does not, however, overturn the basic logic of the hypothetical monopolist test or traditional measurements of market power. We demonstrate some practical ways to apply these antitrust principles to competition among payment card networks.

10. Mergers and acquisitions

2021 ◽  
pp. 106-117
Author(s):  
Ariel Ezrachi
Keyword(s):  
Mergers And Acquisitions ◽  
Market Structure ◽  
Market Power ◽  
Joint Ventures ◽  
Potential Benefit ◽  
Horizontal Mergers ◽  
Administrative System ◽  
The Us ◽  
Vertical Mergers ◽  
The Impact

‘Mergers and acquisitions’ discusses mergers and acquisitions. While of potential benefit to society, mergers, takeovers, share acquisitions, and joint ventures also affect the market structure, and at times may reduce competition. When markets become more concentrated following a merger, we move further away from a competitive market structure to a structure in which market power might undermine the competitive process. To address this risk, the competition agency must assess the impact of the transaction. There are important procedural differences between the European administrative system and the US system in terms of the appraisal of mergers and acquisitions. Other types of mergers include: horizontal mergers, vertical mergers, and conglomerate transactions.

1. Competition policy and economics

2021 ◽  
pp. 1-48
Author(s):  
Richard Whish ◽  
David Bailey
Keyword(s):  
Market Power ◽  
Market Share ◽  
Competition Policy ◽  
Competition Law ◽  
Market Definition ◽  
Economic Context ◽  
Market Shares ◽  
Competition Laws ◽  
Competition Process

This chapter provides an overview of competition law and its economic context. Section 2 describes the practices that competition laws attempt to control in order to protect the competition process. Section 3 examines the theory of competition and gives an introductory account of why the effective enforcement of competition law is thought to be beneficial. Section 4 considers the goals of competition law. Section 5 introduces two key economic concepts, market definition and market power, that are important to a better understanding of competition policy. The chapter concludes with a table of market share figures that are significant in the application of EU and UK competition law, while reminding the reader that market shares are only ever a proxy for market power and can never be determinative of market power in themselves.

17. Payment cards

2017 ◽  
Author(s):  
MA Clarke ◽  
RJA Hooley ◽  
RJC Munday ◽  
LS Sealy ◽  
AM Tettenborn ◽  
...  
Keyword(s):  
General Circulation ◽  
Consumer Credit ◽  
Personal Identification ◽  
Personal Identification Number ◽  
Payment Card ◽  
Contractual Relationships ◽  
Payment Cards ◽  
Lender Liability ◽  
The Uk ◽  
Debit Cards

This chapter focuses on the use of payment cards in commercial transactions. Contactless cards are becoming increasing popular and account for 49 per cent of all cards in issue. Contactless payment is made through the tap of a card on (or by waiving it over) a reader, without requiring a personal identification number or signature. With the increased availability of mobile payment technology, contactless payments are likely to shift from cards to smartphones. This chapter begins with a discussion of the main types of payment card in general circulation in the UK, including credit (and charge) cards, debit cards, and ATM cards. It then considers contractual networks and the regulation of contractual relationships, along with liability for unauthorised transactions under the Consumer Credit Act 1974 (CCA) and Payment Services Regulations 2009. It also describes connected lender liability under CCA.

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