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Platform Competition in Two-Sided Markets: The Case of Payment Networks

Author

Listed:
  • Chakravorti Sujit

    (Economic Research Department, Federal Reserve Bank of Chicago)

  • Roson Roberto

    (Economics Department, University of Venice)

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 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.

Suggested Citation

  • Chakravorti Sujit & Roson Roberto, 2006. "Platform Competition in Two-Sided Markets: The Case of Payment Networks," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-25, March.
    • Handle: RePEc:bpj:rneart:v:5:y:2006:i:1:n:8
    DOI: 10.2202/1446-9022.1092
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    References listed on IDEAS

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