The Economics of Credit Cards
Credit cards and other electronic payment vehicles are a large and increasingly important part of how we do business. Credit cards allow consumers all over the world to have instantaneous access to credit to transact in both traditional in-person retail settings and over the Internet with businesses they will never see. In the U.S., we have become accustomed to paying for an increasing share of our purchases through electronic means.
But behind their convenience and speed lies an often misunderstood economics of consumer credit, two-sided markets, and network systems. Congressional action to regulate these markets must take into consideration the unique nature of this changing form of currency.
Professor Todd Zywicki and Professor Geoffrey Manne provide an overview of the trends and data related to credit card usage, as well as explain the mechanisms which allow them to exist.