Elimination of Competitors: Some Economics of Payment Card Associations

This paper analyzes platforms and rejections in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative antitrust determination of the interchange fee by member banks. We use a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card developed by Rochet and Tirole (2002). After drawing the welfare implications of a cooperative determination of the interchange fee and antitrust conducts, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition.

Elimination of Competitors: Some Economics of Payment Card Associations

This paper analyzes platforms and rejections in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative antitrust determination of the interchange fee by member banks. We use a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card developed by Rochet and Tirole (2002). After drawing the welfare implications of a cooperative determination of the interchange fee and antitrust conducts, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition.

Some Antitrust Foundations of Payment Card Associations

In this study we analyze platforms and rejections in two-sided markets with network externalities, using the specific context of a payment card association. We look at the cooperative antitrust determination of the interchange fee by member banks, using a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card developed by Rochet and Tirole (2002). After showing the welfare implications of a cooperative determination of the interchange fee and antitrust conduct, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition

The effects of non-assertion of patents provisions: R&D incentives in vertical relationships

Using a simple downstream duopoly model with vertical relations and downstream R&D, we investigate the effect of non-assertion of patents (NAP) provisions. A monopoly upstream firm decides whether to employ NAP provisions. If it does so, it freely incorporates the R&D outcomes into its inputs. Incorporation improves the efficiency of the downstream firms' production. We have interpreted the introduction of NAP provisions as a source of technology spillover. Using the technologies of two downstream firms is optimal for the upstream firm if and only if the degree of technology spillover is small. In addition, if the ex ante cost difference between the downstream firms is significant, such technology spillovers erode both the profit of the efficient downstream firm and social welfare. We interpret our result in the context of an actual antitrust case related to this model.

Competition and Sector Growth(<Special issue>Economic Law and Industrial Organization)

競争と経済成長に関しては,Schumpeter(1942)以来,大企業は小企業よりもより技術革新的/集中的な産業における企業はより技術革新的という2つの異なる方向での理論的・実証的な分析がある.本稿は,深尾ほか(2003)のデータを用いて,セクター別に競争と経済成長の関係を検証した.結果としては,市場の競争が激しくなくなったセクター(独占度が高まったセクター)で,生産性の上昇をもたらす傾向が見られ,これは比較的TFP成長率が一定以上のセクターで,またその変動が激しくないセクターで見られた.Regarding competition and sector growth, there are two different ways of theoretical and empirical studies since Schumpeter (1942) ; first, larger firms are more innovative than smaller firms ; second, firms in concentrated sector are more innovative than firms in not concentrated sector. This paper examines the latter aspect that is the relationship between competition andsector growth, sector by sector, by using data of Fukao, et al. (2003). Main result of this paper is that sectors of competition decreasing (sectors become concentrated) tend to raise the sector\u27s productivity. This feature is likely to be seen in higher TFP growth sectors and smaller TFP growth\u27s volatility sectors