A theory of credit cards

Chakravorti, Sujit; To, Ted

doi:10.1016/j.ijindorg.2006.06.005

Cited by 67 publications

(36 citation statements)

References 14 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…We also assume that the network cannot make r c contingent on the state: so r c is entirely pinned down by the outside credit options. 8 This is entirely without loss of generality, given the network extracts the full consumer surplus.…”

Section: Ecb Working Paper Series No 1387mentioning

confidence: 99%

Consumer Credit and Payment Cards

Bolt

Foote²,

Schmiedel

2011

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The future of retail payments: opportunities and challenges Terms of use: Documents in CONFERENCE ON THE FUTURE OF RETAIL PAYMENTS: OPPORTUNITIES AND CHALLENGESThe way people pay is continuously changing, as a result of innovations in retail payments, improvements in efficiency and regulatory changes. This changing environment creates opportunities for some and challenges for others in the retail payments sector. The impact of these changes on the future of retail payments was the main theme of the biannual retail payments conference organised by the European Central Bank (ECB), this time in cooperation with the Oesterreichische Nationalbank The European Commission's proposal for a regulation setting an end date for migration to SEPA credit transfers and SEPA direct debits is welcomed. For SEPA to be a success, it is essential that users are involved, in order to ensure acceptance of the SEPA instruments. Moreover, innovations in retail payments are taking place more rapidly than ever, and payment service providers and regulators need to adapt quickly to this changing business environment.We would like to thank all participants in the conference for the very interesting discussions. In particular, we would like to acknowledge the valuable contributions and insights provided by all speakers, discussants, session chairpersons and panellists, whose names can be found in the conference programme.

show abstract

Section: Ecb Working Paper Series No 1387mentioning

confidence: 99%

Consumer Credit and Payment Cards

Bolt

Foote²,

Schmiedel

2011

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…2 Given that merchants typically do not set surcharges for purchases via payment cards, this raises the question why then do merchants accept these cards, especially where consumers typically have access to other means of payment? Chakravorti and To (2007) provide a model which explains why merchants accept credit cards, based on the ability of credit cards to shift their illiquid customers' consumption forward in time and guarantee sales today versus uncertain sales tomorrow. This relies on consumers being constrained from using other means of payment.…”

Section: Introductionmentioning

confidence: 99%

Why Do Merchants Accept Payment Cards?

Wright¹

2010

Review of Network Economics

View full text Add to dashboard Cite

This short article explains why merchants accept expensive payment cards when merchants are Cournot competitors. The same acceptance rule as the Hotelling price competition model of Rochet and Tirole (2002) is derived. Unlike the models used in the existing literature, in the Cournot setting without free entry of merchants, payment card acceptance expands merchant output and increases merchant profit in equilibrium. With free entry, payment card acceptance increases the number of merchants in the industry and industry output.

show abstract

“…An exception is Chakravorti and To (2007), which develops a theory of credit cards with delayed settlement. However since money is not modeled, the model cannot examine issues of coexistence and substitutability between cash and credit, which is a key contribution of the present paper.…”

Section: Related Literaturementioning

confidence: 99%

Money and credit as means of payment: A new monetarist approach

Lotz

Zhang

2016

Journal of Economic Theory

View full text Add to dashboard Cite

This paper studies the choice of payment instruments in a simple model where both money and credit can be used as means of payment. We endogenize the acceptability of credit by allowing retailers to invest in a costly record-keeping technology. Our framework captures the two-sided market interaction between consumers and retailers, leading to strategic complementarities that can generate multiple steady-state equilibria. In addition, limited commitment makes debt contracts self-enforcing and yields an endogenous upper bound on credit use. So long as record-keeping is imperfect, money and credit coexist for a range of nominal interest rates. Our model captures the dependence of debt limits on monetary policy and explains how hold-up problems in technological adoption prevent retailers from accepting credit as consumers continue to coordinate on cash usage. With limited commitment, changes in monetary policy generate multiplier effects in the credit market due to complementarities between consumer borrowing and the adoption of credit by merchants.

show abstract

A theory of credit cards

Cited by 67 publications

References 14 publications

Consumer Credit and Payment Cards

Consumer Credit and Payment Cards

Why Do Merchants Accept Payment Cards?

Money and credit as means of payment: A new monetarist approach

Contact Info

Product

Resources

About