- 28 October 2011
- WORKING PAPER SERIES - No. 1390Details
- In this paper, we discuss how fraud liability regimes impact the price structure that is chosen by a monopolistic payment platform, in a setting where merchants can invest in fraud detection technologies. We show that liability allocation rules distort the price structure charged by platforms or banks to consumers and merchants with respect to a case where such a responsibility regime is not implemented. We determine the allocation of fraud losses between the payment platform and the merchants that maximises the platform's profit and we compare it to the allocation that maximises social welfare.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
L31 : Industrial Organization→Nonprofit Organizations and Public Enterprise→Nonprofit Institutions, NGOs
L42 : Industrial Organization→Antitrust Issues and Policies→Vertical Restraints, Resale Price Maintenance, Quantity Discounts
- Conference on the future of retail payments: opportunities and challenges