Heresi, José Ignacio (2020) A Multi-Product Model of Credit Cards with Naive Consumers. Toulouse School of Economics (Toulouse).

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We analyze the pricing problem of credit card issuers when setting pertransactionfees for payments and interest rates for the credit associated withthese cards. By considering the issuer’s incentives coming from the creditmarket, we provide a new explanation to the widely observed phenomenonof credit card rewards. Issuers induce higher demand for the credit functionof their cards by lowering per-transaction fees, even to negative levels. Inaddition, by assuming that some consumers face a form of behavioral bias,consistent with recent empirical findings in financial markets, we develop anew explanation for the interest rate exhibiting some degree of stickinessin this market. Finally, we argue that interest rates are independent ofinterchange fees and that interchange fee regulation should take into accountthe costs and benefits of different forms of credit. We analyze the impact of platform price parity clauses when sellers setfinal prices and platforms set fixed fees. In this environment, platforms oftenrely on different tools to affect the degree of competition between sellersand influence final prices charged to consumers. We develop a model inwhich platforms can decide the unitary search cost faced by consumers, andshow when it is profitable for platforms to obfuscate consumers through highsearch costs. Then, we show that price parity clauses, when exogenouslygiven, can reduce or increase prices and consumer surplus. Even thoughplatforms’ demands become independent of prices, price parity clauses makethe equilibrium price set by sellers less responsive to the search cost. Finally,when price parity clauses are endogenous, we show that in the unique equilibrium,platforms set price parity clauses if and only if they lead to higherobfuscation, prices, and lower consumer welfare. We provide a new interpretation for coalition loyalty programs in an environmentwhere consumers search for their preferred products. A dominantfirm in one market can generate a prominent position for another firm in anunrelated market, by offering a reward to consumers conditionally on buyingin both firms. We show when it is optimal for consumers to sample firstthe firms in the coalition. We derive conditions under which this coalitionis profitable in comparison with a case with no coalition and in comparisonwith a case where the dominant firm creates a loyalty program only in itsown market. We find that the coalition can be profitable if and only if itincreases consumer surplus. Then, we explore the case where a continuumof coalitions compete, and show that in this case, consumer surplus is lower,industry profits are higher, and total welfare is ambiguous, relative with acase with no coalitions.


Le résumé en français n'a pas été communiqué par l'auteur.

Item Type: Thesis (UNSPECIFIED)
Other titles: Essais en économie industrielle
Language: English
Date: 4 May 2020
Keywords (French): Consommateurs -- Attitude (psychologie), Cartes de crédit, Taux d'intérêt, Economie industrielle
Subjects: B- ECONOMIE ET FINANCE > B1- Généralités
Divisions: TSE-R (Toulouse)
Ecole doctorale: Toulouse School of Economics (Toulouse)
Site: UT1
Date Deposited: 23 Sep 2020 15:24
Last Modified: 22 Jul 2022 14:40
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