Your network or mine? The economics of routing rules
In many markets, including payment cards and telecommunications, service providers operate networks that support customer transactions with each other. When the two sides of a transaction belong to more than one network in common, the question arises as to which network will carry the transaction. W...
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Published in | The Rand journal of economics Vol. 37; no. 3; pp. 692 - 719 |
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Main Authors | , |
Format | Journal Article |
Language | English |
Published |
Oxford, UK
Blackwell Publishing Ltd
01.09.2006
The RAND Corporation RAND Corporation Rand, Journal of Economics Rand Corporation |
Series | RAND Journal of Economics |
Subjects | |
Online Access | Get full text |
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Summary: | In many markets, including payment cards and telecommunications, service providers operate networks that support customer transactions with each other. When the two sides of a transaction belong to more than one network in common, the question arises as to which network will carry the transaction. We show that the answer depends on a combination of who has the formal authority to choose and the parties' network subscription decisions. Our central finding is that granting formal authority to one side of the market can increase the extent to which transactions run over the network preferred by the other side of the market. We also characterize competing networks' equilibrium choices of routing rules and prices. |
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Bibliography: | ark:/67375/WNG-XP1F11JF-B ArticleID:RAND692 istex:E3E3981DEC78146B8AC5FF0D0B7113820485F752 ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 |
ISSN: | 0741-6261 1756-2171 |
DOI: | 10.1111/j.1756-2171.2006.tb00038.x |