Platform competition in two-sided markets: the case of payment networks
Abstract: In this article, we construct a model to study competing payment networks, where networks offer differentiated products in terms of benefits to consumers and merchants. We study market equilibria for a variety of market structures: duopolistic competition and cartel, symmetric and asymmetric networks, and alternative assumptions about multihoming and consumer preferences. We find that competition unambiguously increases consumer and merchant welfare. We extend this analysis to competition among payment networks providing different payment instruments and find similar results.
File(s): File format is application/pdf http://www.chicagofed.org/digital_assets/publications/working_papers/2004/wp2004_09.pdf
Provider: Federal Reserve Bank of Chicago
Part of Series: Working Paper Series
Publication Date: 2004