The break of brand exclusivity in Brazilian credit card acquiring: effects and markup-cost decomposition in a price dispersion setting
Submitted by admin on 28 July 2015 - 4:52pm
Produced by:
Banco Central do Brasil
Available from:
June 2015
Topic:
Financial Economics
Year:
2015
Visanet monopolized Visa merchant acquiring activities in Brazil while Redecard did the same for MasterCard, until the industry was under authorities’ scrutiny and exclusivity was broken in mid-2010. In this paper, we perform two main tasks. First, we use the knowledge of part of the marginal cost specific to this industry (the interchange fee) to identify markup and marginal cost using individual merchant data. Then, we use this framework to evaluate the impact of the change of the environment on these price components. We find sizable reduction in markup as a result of increased competition.
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