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Evaluating Efficient Multilateral Interchange Fees: Evidence from End-User Benefits

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  • Egor A. Krivosheya

    (National Research University Higher School of Economics)

Abstract

This article evaluates the efficiency of current MIF rates for the Russian market and identifies the effects of their changes. In order to estimate the demand of end users and end-user surpluses the study uses the adopted version of the Bedre-Defolie and Calvano (2013) model as well as representative samples of 800 traditional (offline) Russian merchants, 1500 Russian individuals and 7 banks from the top 20 that cover more than 80% of the Russian issuing and acquiring markets and the end-user benefits. Results confirm the efficiency of currently set MIF rates. Comparative statics analysis confirms that the changes in MIF rates never lead to a Pareto improvement, while the total surplus changes are asymmetric across different market parts. The article also shows that once the realistic assumptions are introduced to the models (e.g., information asymmetry, imperfect pass-through of changes) the end-user welfare is distorted more severely as a result of the MIF rates changes. The first-best policy for the Russian regulator and legislators is the use of alternative (non-tariff) stimulating measures for a cashless economy in order to isolate the effect of changes to the intended groups

Suggested Citation

  • Egor A. Krivosheya, 2018. "Evaluating Efficient Multilateral Interchange Fees: Evidence from End-User Benefits," HSE Working papers WP BRP 66/FE/2018, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:66/fe/2018
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    File URL: https://wp.hse.ru/data/2018/07/09/1151824202/66FE2018.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Retail payments; payment cards; interchange fees; efficiency; optimal regulation;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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