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TOTM Although the mechanisms vary, legislation pending before Congress on interchange has a basic central purpose—to reduce interchange fees, either indirectly or directly. If adopted, these . . .
Although the mechanisms vary, legislation pending before Congress on interchange has a basic central purpose—to reduce interchange fees, either indirectly or directly. If adopted, these efforts will likely succeed in their intended goal of reducing interchange fees. But they will also likely have substantial unintended consequences that will prove harmful to consumers and competition and will roll-back the innovation in the credit card market over the past two decades.
Read the full piece here.
TOTM What happens when you take a key price in an industry and cut it in half? For normal markets economists would expect that this would . . .
What happens when you take a key price in an industry and cut it in half? For normal markets economists would expect that this would have a dramatic effect on quantity. That, however, was not the experience in Australia when the Reserve Bank of Australian (RBA) used new powers in 2003 to move Visa and MasterCard interchange fees from around 0.95 percent of the value of a transaction to just 0.5 percent. The evidence demonstrates that this change was virtually undetectable in any real variable to do with that industry.
TOTM Next summer, the World Cup, the world’s most watched sporting event, marks its quadrennial return. Although thirty-two teams will compete in South Africa, the list . . .
Next summer, the World Cup, the world’s most watched sporting event, marks its quadrennial return. Although thirty-two teams will compete in South Africa, the list of favorites begins with the two teams that have won half of the previous eighteen tournaments and three of the last four—Brazil and Italy. Brazil plays an open and flowing brand of soccer. Italy sits back and pounces when its opponents stumble. Although Brazil and Italy follow different philosophies, they have achieved similar success because both have adopted strategies to overcome the adversity that inevitably arises in a major tournament. Even a weak opponent can manage to score a single goal when a referee blows a call. But good teams find a way to overcome.
TOTM Interchange fees on payment cards are obviously a hot topic in the United States, but also in Europe and in many other countries around the . . .
Interchange fees on payment cards are obviously a hot topic in the United States, but also in Europe and in many other countries around the world. The report on interchange fees released last month by the US Government Accounting Office (GAO) notes that more than 30 countries have intervened or are considering intervening in the payment card industry.
TOTM What is most surprising about the GAO report is how little the analytical discussion of this subject has advanced in the last decade. We all . . .
What is most surprising about the GAO report is how little the analytical discussion of this subject has advanced in the last decade. We all know that interchange rates might contribute to higher retail prices: customers that use cheaper payment products can be said to “subsidize” customers that use credit cards. Starting with the Australian initiative, regulators for a decade have sought to understand the costs of credit-card processing and to push interchange fees down to the “competitive” level of the “costs” of providing the service. Conversely, economists writing about two-sided networks have shown that the focus on costs reflects a fundamental misunderstanding of the two-sided network, in which the interchange fee is an allocation of burden between merchants and cardholders, not a charge for services rendered to one side or the other.
Presentations & Interviews Last June, Christine Varney, then a lawyer in private practice, now President Obama’s nominee to be the next Assistant Attorney General for Antitrust, warned that . . .
Last June, Christine Varney, then a lawyer in private practice, now President Obama’s nominee to be the next Assistant Attorney General for Antitrust, warned that Google, not Microsoft, is the monopolist of the future. “For me, Microsoft is so last century. They are not the problem,” Varney said at a June 19 panel discussion sponsored by the American Antitrust Institute. The U.S. economy will “continually see a problem — potentially with Google” because it already “has acquired a monopoly in Internet online advertising.” Concerns of this nature ultimately led Tom Barnett, the last Assistant Attorney General for Antitrust, to threaten a Sherman Act monopolization lawsuit if Google went through with plans to buy Yahoo. Google, on the other hand, contends that the concerns are completely misplaced. “The nature of the Internet is just a fundamentally different world from the sale of packaged software or the bundling of software with OEMs (original equipment manufacturers),” according to Kent Walker, Google’s General Counsel. “The standard line we have is that competition is just one click away.”
Panelists:
Full audio is embedded below.
TOTM Apparently the Obama administration is not very confident about getting its environmental climate change agenda passed through Congress. Given a legislative “solution” is off the . . .
Apparently the Obama administration is not very confident about getting its environmental climate change agenda passed through Congress. Given a legislative “solution” is off the table, at least for the foreseeable future, perhaps it is not surprising that today the EPA announced it’s ruling that greenhouse gases are “a danger to public health and welfare“.
Presentations & Interviews Last June, Christine Varney, then a lawyer in private practice, now President Obama's nominee to be the next Assistant Attorney General for Antitrust, warned that Google, not Microsoft, is the monopolist of the future.
Last June, Christine Varney, then a lawyer in private practice, now President Obama’s nominee to be the next Assistant Attorney General for Antitrust, warned that Google, not Microsoft, is the monopolist of the future.
“For me, Microsoft is so last century. They are not the problem,” Varney said at a June 19 panel discussion sponsored by the American Antitrust Institute. The U.S. economy will “continually see a problem — potentially with Google” because it already “has acquired a monopoly in Internet online advertising.” Concerns of this nature ultimately led Tom Barnett, the last Assistant Attorney General for Antitrust, to threaten a Sherman Act monopolization lawsuit if Google went through with plans to buy Yahoo.
Google, on the other hand, contends that the concerns are completely misplaced. “The nature of the Internet is just a fundamentally different world from the sale of packaged software or the bundling of software with OEMs (original equipment manufacturers),” according to Kent Walker, Google’s General Counsel. “The standard line we have is that competition is just one click away.
