IDEAS home Printed from https://ideas.repec.org/p/bdm/wpaper/2012-02.html
   My bibliography  Save this paper

The Adoption Process of Payment Cards -An Agent- Based Approach

Author

Listed:
  • Alexandrova-Kabadjova Biliana
  • Castellanos Pascacio Sara Gabriela
  • García-Almanza Alma L.

Abstract

We investigate the payment card's adoption rate under consumers' and merchants' awareness of network externalities, given two levels of Interchange Fees in a multiagent card market. For the purpose of our research, in multiple instances of the model (scenarios) the investigated effects are analyzed over the complete process of adoption, until the market's saturation point is achieved. For each scenario, a comparison is made between two different levels of Interchange Fees and different degrees of consumers' and merchants' awareness. We model explicitly the interactions between consumers and merchants at the point of sale. We allow card issuers to charge consumers with fixed fees and provide net benefits from card usage, whereas acquirers can charge fixed and transactional fees to merchants.

Suggested Citation

  • Alexandrova-Kabadjova Biliana & Castellanos Pascacio Sara Gabriela & García-Almanza Alma L., 2012. "The Adoption Process of Payment Cards -An Agent- Based Approach," Working Papers 2012-02, Banco de México.
    • Handle: RePEc:bdm:wpaper:2012-02
    as

    Download full text from publisher

    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7BFB86DA96-2515-2CE2-828C-04A75AB8D306%7D.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. anonymous, 2008. "Federal Reserve Bank of Kansas City: 2007 annual report," TEN, Federal Reserve Bank of Kansas City, issue Spr, pages 37-81.
    2. Alan Kirman, 2010. "The Economic Crisis is a Crisis for Economic Theory ," CESifo Economic Studies, CESifo Group, vol. 56(4), pages 498-535, December.
    3. D. Colander & H. Follmer & A. Haas & M. Goldberg & K. Juselius & A. Kirman & T. Lux & B. Sloth, 2010. "The Financial Crisis and the Systemic Failure of Academic Economics," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 6.
    4. Wilko Bolt & Sujit Chakravorti, 2008. "Economics of payment cards: a status report," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 32(Q IV), pages 15-27.
    5. LeBaron, Blake, 2006. "Agent-based Computational Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 24, pages 1187-1233, Elsevier.
    6. repec:bla:jindec:v:50:y:2002:i:2:p:103-22 is not listed on IDEAS
    7. Chakravorti Sujit, 2003. "Theory of Credit Card Networks: A Survey of the Literature," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-19, June.
    8. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-588, October.
    9. Leigh Tesfatsion & Kenneth L. Judd (ed.), 2006. "Handbook of Computational Economics," Handbook of Computational Economics, Elsevier, edition 1, volume 2, number 2.
    10. Chakravorti, Sujit & To, Ted, 2007. "A theory of credit cards," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 583-595, June.
    11. Jean-Charles Rochet Author-Email:rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
    12. Chakravorti Sujit, 2010. "Externalities in Payment Card Networks: Theory and Evidence," Review of Network Economics, De Gruyter, vol. 9(2), pages 1-28, June.
    13. Richard Schmalensee, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    14. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, September.
    15. LeBaron, Blake, 2000. "Agent-based computational finance: Suggested readings and early research," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 679-702, June.
    16. repec:reg:rpubli:105 is not listed on IDEAS
    17. Neil Johnson & Thomas Lux, 2011. "Ecology and economics," Nature, Nature, vol. 469(7330), pages 302-303, January.
    18. Wright, Julian, 2003. "Pricing in debit and credit card schemes," Economics Letters, Elsevier, vol. 80(3), pages 305-309, September.
    19. John Vickers, 2005. "Public policy and the invisible price : competition law, regulation, and the interchange fee," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 231-247.
    20. Roson Roberto, 2005. "Two-Sided Markets: A Tentative Survey," Review of Network Economics, De Gruyter, vol. 4(2), pages 1-19, June.
    21. David S. Evans & Richard Schmalensee, 2005. "The economics of interchange fees and their regulation : an overview," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 73-120.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Angel De la Fuente, 2013. "La evolucion de la financiacion de las comunidades autonomas de regimen comun, 2002-2011," Working Papers 1332, BBVA Bank, Economic Research Department.
    2. Javier Alonso & Maria Lamuedra & David Tuesta, 2013. "Potentiality of reverse mortgages to supplement pension: the case of Chile," Working Papers 1311, BBVA Bank, Economic Research Department.
    3. Tatiana Alonso & Javier Alonso & Santiago Fernandez de Lis & Cristina Rohde & David Tuesta, 2013. "Global Financial Regulatory Trends and Challenges for Insurance and Pensions," Working Papers 1321, BBVA Bank, Economic Research Department.
    4. Robert Holzmann & Richard Hinz & David Tuesta, 2012. "Early Lessons from Country Experience with Matching Contribution Schemes for Pensions," Working Papers 1231, BBVA Bank, Economic Research Department.
    5. Javier Alonso & Tatiana Alonso & Santiago Fernandez de Lis & Cristina Rohde & David Tuesta, 2013. "Tendencias regulatorias financieras globales y retos para las Pensiones y Seguros," Working Papers 1323, BBVA Bank, Economic Research Department.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Biliana Alexandrova-Kabadjova & Alma L. Garcia-Almanza & Sara G. Castellanos Pascacio, 2012. "El proceso de adopcion de tarjetas de pago: un enfoque basado en agentes," Working Papers 1214, BBVA Bank, Economic Research Department.
    2. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
    3. Alexandrova-Kabadjova, Biliana & Negrín, José Luis, 2009. "What drives the network’s growth? An agent-based study of the payment card market," Working Paper Series 1143, European Central Bank.
    4. Wilko Bolt & Sujit Chakravorti, 2011. "Pricing in Retail Payment Systems: A Public Policy Perspective on Pricing of Payment Cards," DNB Working Papers 331, Netherlands Central Bank, Research Department.
    5. Economides, Nicholas & Henriques, David, 2011. "To surcharge or not to surcharge? A two-sided market perspective of the no-surchage rule," Working Paper Series 1388, European Central Bank.
    6. Bolt, Wilko & Schmiedel, Heiko, 2009. "SEPA, efficiency, and payment card competition," Working Paper Series 1140, European Central Bank.
    7. James J. McAndrews & Zhu Wang, 2008. "The economics of two-sided payment card markets: pricing, adoption and usage," Research Working Paper RWP 08-12, Federal Reserve Bank of Kansas City.
    8. Zenger, Hans, 2010. "Perfect surcharging and the tourist test interchange fee," MPRA Paper 27004, University Library of Munich, Germany.
    9. Fumiko Hayashi, 2008. "The economics of payment card fee structure: what is the optimal balance between merchant fee and payment card rewards?," Research Working Paper RWP 08-06, Federal Reserve Bank of Kansas City.
    10. Julian Wright, 2012. "Why payment card fees are biased against retailers," RAND Journal of Economics, RAND Corporation, vol. 43(4), pages 761-780, December.
    11. Santiago Carbó-Valverde & Sujit Chakravorti & Francisco Rodríguez-Fernández, 2009. "Regulating two-sided markets: an empirical investigation," Working Paper Series WP-09-11, Federal Reserve Bank of Chicago.
    12. Stuart E. Weiner & Julian Wright, 2005. "Interchange fees in various countries : developments and determinants," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 5-49.
    13. Oz Shy, 2011. "A Short Survey of Network Economics," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(2), pages 119-149, March.
    14. Carbó-Valverde Santiago & Liñares-Zegarra José Manuel & Rodríguez-Fernández Francisco, 2012. "Feedback Loop Effects in Payment Card Markets: Empirical Evidence," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-24, June.
    15. Verdier, Marianne, 2010. "Interchange fees and incentives to invest in payment card systems," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 539-554, September.
    16. Wilko Bolt & Sujit Chakravorti, 2008. "Economics of payment cards: a status report," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 32(Q IV), pages 15-27.
    17. Zenger, Hans, 2011. "Perfect surcharging and the tourist test interchange fee," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2544-2546, October.
    18. Fumiko Hayashi & Stuart E. Weiner, 2005. "Competition and credit and debit card interchange fees: a cross-country analysis," Payments System Research Working Paper PSR WP 05-03, Federal Reserve Bank of Kansas City.
    19. Wilko Bolt, 2012. "Retail Payment Systems: Competition, Innovation, and Implications," DNB Working Papers 362, Netherlands Central Bank, Research Department.
    20. David S. Evans & Richard Schmalensee, 2005. "The economics of interchange fees and their regulation : an overview," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 73-120.

    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdm:wpaper:2012-02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Subgerencia de desarrollo de sistemas (email available below). General contact details of provider: https://edirc.repec.org/data/bangvmx.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.