Market structure and information in payment card markets

  • Biliana Alexandrova-Kabadjova
  • Edward Tsang
  • Andreas Krause
Article

Abstract

This paper investigates the structure of the payment card market, with consumers and merchants basing their subscription decisions on different information sets. We find that the market structure depends crucially on the information set on which consumers and merchants base their subscription decisions. In the studied case, we observe that a market with few cards dominating only emerges when decisions are based on very limited information. Under the same conditions using a complete information set, all cards survive in the long run. The use of an agent-based model, focusing on the interactions between merchants and consumers, as a basis for subscription decisions allows us to investigate the dynamics of the market and the effect of the indirect network externalities rather than investigating only equilibrium outcomes.

Keywords

Two-sided markets network externalities agent-based modelling competition payment cards 

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Copyright information

© Institute of Automation, Chinese Academy of Sciences and Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Biliana Alexandrova-Kabadjova
    • 1
  • Edward Tsang
    • 2
  • Andreas Krause
    • 3
  1. 1.General Directorate of Payment Systems and RiskBanco de MexicoMexicoMexico
  2. 2.Centre for Computational Finance and Economic AgentsUniversity of EssexColchesterUK
  3. 3.School of ManagementUniversity of BathBathUK

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