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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Credit card interchange fees
Organization Unit
Authors
  • Jean-Charles Rochet
  • Julian Wright
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Journal of Banking and Finance
Publisher Elsevier
Geographical Reach international
ISSN 0378-4266
Volume 34
Number 8
Page Range 1788 - 1797
Date 2010
Abstract Text We build a model of credit card pricing that explicitly takes into account credit functionality. In the model a monopoly card network always selects an interchange fee that exceeds the level that maximizes consumer surplus. If regulators only care about consumer surplus, a conservative regulatory approach is to cap interchange fees based on retailers’ net avoided costs from not having to provide credit themselves. This always raises consumer surplus compared to the unregulated outcome, sometimes to the point of maximizing consumer surplus.
Digital Object Identifier 10.1016/j.jbankfin.2010.02.026
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