Payment system efficiency and pro-competitive regulation

• Effective competition guarantees that prices are set at such a level that efficiency is promoted (resulting in so-called allocative efficiency), but in markets characterised by large returns to scale and strong network effects, it may be too costly to have more than one firm operating. In such markets, known as natural monopolies, technical efficiency is best achieved by a single firm. More generally, a given market may be too small to support enough firms to guarantee effective competition. This creates a dilemma: if the market is monopolised, market power and monopoly pricing will result in allocative inefficiencies, while if several firms are active, there will be technical inefficiencies (or positive network effects will not be fully exploited). In many natural monopolies, regulators have sought to resolve this dilemma by introducing pro-competitive regulation. This article discusses the merits of introducing regulations in the payment-system markets.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

betalningssystem

nätverkseffekter

tvåsidiga marknader

konkurrenspolitik

Publication and Content Type

vet (subject category)

art (subject category)