Imperfect Competition and the Pricing of Interbank Payment Services

16 Pages Posted: 2 Dec 2012

See all articles by John A. Weinberg

John A. Weinberg

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 2002

Abstract

Interbank payment arrangements create tension between competition and cooperation among banks. One bank’s payment services to a rival's depositors enhance the value of the rival's deposit services. The strategic effects of the pricing of interbank services are very different in a segmented market than in a market with direct competition for depositors. Public policy often is more accepting of cooperation among banks in setting interbank prices than in setting the prices of “final goods” like deposits. Such a policy stance makes sense in segmented markets. With direct competition for depositors, however, cooperative interbank pricing could dampen competition in deposit markets.

Suggested Citation

Weinberg, John A., Imperfect Competition and the Pricing of Interbank Payment Services (2002). FRB Richmond Economic Quarterly, vol. 88, no. 1, Winter 2002, pp. 51-66, Available at SSRN: https://ssrn.com/abstract=2183376

John A. Weinberg (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8205 (Phone)
804-697-8255 (Fax)

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