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Abstract

An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems

The Review of Network Economics

Vol. 2, Issue 2 - June 2003, pp 69-79


Authors
  Jean-Charles Rochet
IDEI, Toulouse University, and LSE
E-mail: [email protected]

Jean Tirole
IDEI, Toulouse University, and MIT

Abstract
  The paper investigates, in a non-technical fashion, the economic determinants of interchange fees in payment card systems and the potential need for their regulation. Among other things, it demonstrates that the proposal for a cost-based regulation of interchange fees relies on an erroneous, vertically organized, model of the payment card industry.

Keywords: payment systems, credit cards, interchange fees, regulation, banks

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