The Failure of Price Competition in Settings with Marketing Costs : The Case of Credit Cards

@inproceedings{Frank2009TheFO,
  title={The Failure of Price Competition in Settings with Marketing Costs : The Case of Credit Cards},
  author={Josh Frank and Ph. D. Senior},
  year={2009}
}
There is an ongoing debate about the credit card industry regarding how effective competition has been at reducing prices. Some experts argue that intense competition is clearly evident and leads to low prices that contain no excess profit. However, other experts find evidence both in price data and in market concentration that competition has failed. A model is presented here showing that if there are temporarily excess profits in a competitive market with a structure resembling that of the… CONTINUE READING