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Fraud, Investments and Liability Regimes in Payment Platforms

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  • Anna Creti

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Marianne Verdier

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we discuss how fraud liability regimes impact the price structure that is chosen by a monopolistic payment platform, in a setting where merchants can invest in fraud detection technologies. We show that liability allocation rules distort the price structure charged by platforms or banks to consumers and merchants with respect to a case where such a responsibility regime is not implemented. We determine the allocation of fraud losses between the payment platform and the merchants that maximises the platform's profit and we compare it to the allocation that maximises social welfare.

Suggested Citation

  • Anna Creti & Marianne Verdier, 2011. "Fraud, Investments and Liability Regimes in Payment Platforms," Working Papers hal-04140951, HAL.
    • Handle: RePEc:hal:wpaper:hal-04140951
    Note: View the original document on HAL open archive server: https://hal.science/hal-04140951
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    References listed on IDEAS

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