An Empirical Analysis of UK Credit Card Pricing

An Empirical Analysis of UK Credit Card Pricing Previous studies show that the credit card market is imperfectly competitive. Using a reduced form hedonic model, the current paper demonstrates a relationship between credit card interest rates and product differentiation characteristics. The characteristics capture issuers’ attempts to: (1) screen/separate customers with different default risk characteristics and (2) better meet heterogeneous customer preferences. The results are consistent with risk-based pricing and monopolistic competition in the credit card market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

An Empirical Analysis of UK Credit Card Pricing

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Publisher
Springer Journals
Copyright
Copyright © 2010 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-010-9258-4
Publisher site
See Article on Publisher Site

Abstract

Previous studies show that the credit card market is imperfectly competitive. Using a reduced form hedonic model, the current paper demonstrates a relationship between credit card interest rates and product differentiation characteristics. The characteristics capture issuers’ attempts to: (1) screen/separate customers with different default risk characteristics and (2) better meet heterogeneous customer preferences. The results are consistent with risk-based pricing and monopolistic competition in the credit card market.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jul 24, 2010

References

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