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A Note on Partial Merchant Internalization and MIT Threshold

Author

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  • Vilen Lipatov

Abstract

In framework of Rochet and Tirole (2011), I allow for partial merchant internalization and study how MIT threshold is related to levels of inter-change fee that maximize various components of social welfare. I find that cost absorption on the side of issuers and merchant heterogeneity each bias MIT threshold upward from TUS maximizing level.

Suggested Citation

  • Vilen Lipatov, 2015. "A Note on Partial Merchant Internalization and MIT Threshold," CESifo Working Paper Series 5684, CESifo.
    • Handle: RePEc:ces:ceswps:_5684
    as

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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp5684.pdf
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    References listed on IDEAS

    as
    1. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    2. Schmiedel, Heiko & Börestam, Ann, 2011. "Interchange fees in card payments," Occasional Paper Series 131, European Central Bank.
    3. Rochet, Jean-Charles & Wright, Julian, 2010. "Credit card interchange fees," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1788-1797, August.
    4. Jean‐Charles Rochet & Jean Tirole, 2011. "Must‐Take Cards: Merchant Discounts And Avoided Costs," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 462-495, June.
    5. Börestam, Ann & Schmiedel, Heiko, 2011. "Interchange fees in card payments," Occasional Paper Series 131, European Central Bank.
    6. Wang, Zhu, 2010. "Market structure and payment card pricing: What drives the interchange?," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 86-98, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    MIT; merchant internalization; payment cards; two-sided markets;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other

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