A Note on Partial Merchant Internalization and MIT Threshold

13 Pages Posted: 5 Feb 2016

Date Written: December 2015

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.

Keywords: MIT, merchant internalization, payment cards, two-sided markets

JEL Classification: E420, G280, K210, L490

Suggested Citation

Lipatov, Vilen, A Note on Partial Merchant Internalization and MIT Threshold (December 2015). CESifo Working Paper Series No. 5684, Available at SSRN: https://ssrn.com/abstract=2727154

Vilen Lipatov (Contact Author)

ECA Economics GmbH ( email )

Avenue Louise 500
Brussels
Belgium

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