AN EMPIRICAL ANALYSIS OF PAYMENT CARD USAGE

Author: RYSMAN, MARC¹

Source: Journal of Industrial Economics, Volume 55, Number 1, March 2007 , pp. 1-36(36)

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Abstract:

I exploit a unique data set on the payment card industry to study issues associated with network effects and two-sided markets. I show that consumers concentrate their spending on a single payment network (single-homing), although many maintain unused cards that allow the ability to use multiple networks (multi-homing). Further, I establish a regional correlation between consumer usage and merchant acceptance within the four major networks (Visa, Mastercard, American Express and Discover). This correlation is suggestive of the existence of a positive feedback loop between consumer usage and merchant acceptance.

Document Type: Research article

DOI: 10.1111/j.1467-6451.2007.00301.x

Affiliations: 1: Department of Economics, Boston University. 270 Bay State Road, Boston, Massachusetts, 02215 U.S.A., Email: mrysman@bu.edu