Market Structure and Information in Payment Card Markets

What is it about?

This paper investigates the market structure of the payment card market, with consumers and merchants taking their subscription decisions on information sets constructed under different rules. We find conditions for the business interactions among them, in which the market structure depends crucially on the specific information set. For instance, starting with high number of card issuers, when adoption decisions are based on very limited information, only few cards dominate on the long run. Oppositely, with the same initial conditions, when consumers have access to all information available in the market, all card issuers survive at the end.

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Why is it important?

The use of an agent-based model, focusing on the interactions between merchants and consumers as drivers for subscription decisions, allows to investigate the dynamics of the market and the effect of the indirect network externalities.

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