Title: Cross-network externality analysis of the price structure on the credit card market in China

Authors: Ning Ding

Addresses: Dongbei University of Finance and Economics, Dalian 116025, Liaoning Province, China

Abstract: The Chinese credit card market has entered into a rapid development stage with the increase of residential income levels, advanced improvement of e-payment systems as well as policy perception on domestic demand expansion. There has been exponential growth in the credit card market. However, there are many disputes on commissions among the Point of Sale (POS) merchants regarding the extra charges arising from using the cards. Thus, the rationality of its market price structure is doubted. The paper adopts a price structure model for the credit card market under imperfect competition circumstances based on two-sided market theory. The paper produces an empirical analysis on the cross-network externality of the credit card market during the period of 1995-2013 and concludes that the reason why there are extra charges for using the cards is not the problem of price structure. Finally, possible suggestions are mentioned to improve the credit card markets and reduce financial risks.

Keywords: two-sided markets; price structure; cross-network externality; financial risk management; credit card market; China; credit cards; imperfect competition.

DOI: 10.1504/IJSS.2014.067355

International Journal of Services and Standards, 2014 Vol.9 No.2/3/4, pp.130 - 145

Received: 14 Dec 2014
Accepted: 21 Dec 2014
Published online: 06 Feb 2015 *

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