Consumer choice and merchant acceptance of payment media

Arbeitspapier

We study the ability of banks and merchants to influence the consumer's payment instrument choice. Consumers participate in payment card networks to insure themselves against three types of shocks| income, theft, and their merchant match. Merchants choose which payment instruments to accept based on their production costs and increased profit opportunities. Our key results can be summarized as follows. The structure of prices is determined by the level of the bank's cost to provide payment services including the level of aggregate credit loss, the probability of theft, and the timing of income flows. We also identify equilibria where the bank finds it profitable to offer one or both payment cards. Our model predicts that when merchants are restricted to charging a uniform price for goods that they sell, the bank benefits while consumers and merchants are worse off. Finally, we compare welfare-maximizing price structures to those that result from the bank's profit-maximizing price structure.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2008-11

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; General Equilibrium and Disequilibrium: Financial Markets
• Thema: - Retail Financial Services ; Network Effects ; Social Welfare ; Multihoming ; Payment Card Networks

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bolt, Wilko ; Chakravorti, Sujit
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Chicago
• (wo): Chicago, IL
• (wann): 2008

Weitere Informationen

• Handle: http://hdl.handle.net/10419/70597
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ