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Truth on the Market

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Last Entry: April 01, 2011 at 00:51:38

Informational Cascades, Reputational Cascades, Group Polarization, and the Climate Emails

Posted on December 10, 2009
It’s been interesting to observe the responses to the hacked emails from the Climate Research Unit at the University of East Anglia. The emails seem to show leading global warming scientists massaging data to generate the result they prefer (i...

Interchange fees and other rules

Posted on December 09, 2009
The GAO report raises concerns about card association the level of interchange fees (that acquirers pay issuers for credit card transactions processed) but also about other card association rules such as the ‘no surcharge rule.’ That rule prevents a merchant who accepts card transactions from charging a ‘point of sale’ premium to consumers who use [...

Surcharging and Honor-All-Cards

Posted on December 09, 2009
Disclaimer: These views are my own and not those of the Federal Reserve Bank of Chicago or the Federal Reserve System. Much of this discussion is taken from my paper titled ?Externalities in Payment Card Networks: Theory and Evidence? presented at the Federal Reserve Bank of Kansas City?s 2009 Retail Payments Conference...

The Merchants’ Insincere Concern About Cross-Consumer Subsidies

Posted on December 09, 2009
In my first post I argued that consumers as a group would likely be made worse off as a result of artificially imposed reductions in interchange fees. This post considers a second line of attack?that even if consumers overall would be made no better off (or even worse off) as a result of regulating interchange [...

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Debunking the “Cross-Subsidy” Theory

Posted on December 09, 2009
(NB: We have consulted with Visa U.S.A. Inc. on a variety of issues; the views expressed herein are our own.) In our earlier post, we observed that the GAO report on interchange got off on the wrong foot when it concluded that interchange fees were rising...

Welcome to Day Two

Posted on December 09, 2009
The Law and Economics of Interchange Fees and Credit Card Markets Welcome to day two of of our two-day symposium on the law and economics of interchange fees and credit cards. Our symposium brings together several of the world’s leading experts on interchange fees and the law and economics of credit card markets...

The Institutional Dynamic: Understand First, Act Second?If At All

Posted on December 09, 2009
I have now had a chance to review the excellent posts on the second day, all of which have a common flavor. They expand the universe of relative considerations that need to be taken into account to decide whether imposing caps on interchange fees enhances or reduces overall social welfare...

Merchant Collusion as an Antitrust Remedy

Posted on December 09, 2009
In my first post I discussed the potential for interchange legislation from a consumer protection perspective, that is, would the combination of disclosure requirements coupled with a reduction of interchange fees be likely to improve consumer welfare...

Competitive Payments

Posted on December 09, 2009
Most of the discussion related to pricing at the point of sale has emphasized the ?cross-subsidy? between those that pay with cash and checks and those that pay with credit cards. This discussion misses the core of the problem in a market where the use of cash and checks is rapidly declining; the central problem [...

The Fee Neutrality Claim

Posted on December 09, 2009
Will reduction in interchange fees help or hurt consumers? Two posts yesterday made the conjecture that a reduction in one category of fees would only increase other fees, and that the overall sum of fees will not change. This is the fee-neutrality claim...

Allocating the Costs of Fraud

Posted on December 09, 2009
Geoffrey A. Manne is Executive Director of the International Center for Law & Economics and a Lecturer in Law at Lewis & Clark Law School. I take to heart Jim’s claim that fraud is too-little discussed in this realm given its cost, and thus I’ll try my hand at it...

Assessing the Social Effects of the Use of Credit Cards

Posted on December 09, 2009
The GAO has a fairly extensive discussion of the costs and benefits of credit cards to merchants. However, that discussion focuses on the individual benefits. I would like to step back and put two of those benefits ? increased merchant sales and fraud prevention costs ? into the larger context that I discussed earlier...

The Cost of Payments Interchange: Issues No One Talks About

Posted on December 09, 2009
James Van Dyke is President and Founder of Javelin Strategy and Research. I feel that at least two important issues are being left out of the raging controversy over the cost of interchange. (At this point my readers are probably deciding if I?ll follow with a pro-merchant or pro-bank POV?but guess what: here comes one of [...

Regulating Interchange Fees will Promote Term Repricing that will be Harmful to Consumers and Competition

Posted on December 08, 2009
Todd J. Zywicki is Foundation Professor of Law at George Mason University School of Law. Although the mechanisms vary, legislation pending before Congress on interchange has a basic central purpose?to reduce interchange fees, either indirectly or directly...

What happened in Australia?

Posted on December 08, 2009
Joshua Gans is the foundation Professor of Management (Information Economics) at the Melbourne Business School, University of Melbourne. 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...

The Economics of Payment Cards: Six Lessons from the Literature

Posted on December 08, 2009
Sujit ‘Bob’ Chakravorti is a senior economist in the financial markets group at the Federal Reserve Bank of Chicago. Disclaimer: These views are my own and not those of the Federal Reserve Bank of Chicago or the Federal Reserve System. Much of this discussion is taken from my paper titled ?Externalities in Payment Card Networks: Theory [...

Interchange Fees Are Not Rising: Correcting the GAO Report

Posted on December 08, 2009
Thomas Brown is a partner in O?Melveny and Myers’ San Francisco office. Timothy J. Muris is Foundation Professor of Law at George Mason University School of Law and Of Counsel in O’Melveny & Myers’ Washington DC office. Next summer, the World Cup, the world?s most watched sporting event, marks its quadrennial return...

Credit Cards in Context: Framing the Discussion

Posted on December 08, 2009
Allan L. Shampine is a Vice President at Compass Lexecon in Chicago While the GAO report provides a useful summary of many of the issues being debated within the credit card community, the GAO?s mandate was, in some ways, rather narrow. The GAO was asked to ?review (1) how the fees merchants pay have changed over [...

Seven Truths About Regulating Interchange

Posted on December 08, 2009
Robert Stillman is a Vice President in the European Competition Practice of Charles River Associates 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) [...

Moving the Ball Forward: Macroeconomic Considerations

Posted on December 08, 2009
Ronald J. Mann is Professor of Law at Columbia University Law School. 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 [...

Why Now? The Faulty Economics of Credit Card Reform

Posted on December 08, 2009
Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago, the Peter and Kirstin Bedford Senior Fellow at the Hoover Institution, and a visiting professor at New York University Law School. About four years ago, I worked for Visa in opposing the opposed limitations on interchange fees that [...

Welcome: The Law and Economics of Interchange Fees and Credit Card Markets

Posted on December 08, 2009
The Law and Economics of Interchange Fees and Credit Card Markets Today marks the start of our two-day symposium on the law and economics of interchange fees and credit cards. As I noted in my announcement, the scholarly and policy debates over interchange fees and credit card markets more generally are raging, with several bills pending [...

EPA’s Legislative End-run Strategy

Posted on December 08, 2009
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“...

Onions Forever! A Response to Allan Shampine

Posted on December 08, 2009
There is nothing like the provocative post from Allan Shampine to move this debate up a notch. First, I did not say that the debate over interchange fees was Onionesque. I reserved that dubious distinction to the on-the-hand-on-the-other-hand title of the GAO report...

Interchange Legislation as Counterproductive Consumer Protection Regulation

Posted on December 08, 2009
Joshua D. Wright is Assistant Professor of Law and George Mason University School of Law. I want to begin with the premise that the legislation pending in Congress, in whatever form is ultimately adopted, will be successful in reducing interchange fees before turning to the question of whether such a reduction can be justified...

The Myth of Consumer Protection Through Disclosure

Posted on December 08, 2009
Omri Ben-Shahar is the Frank and Bernice J. Greenberg Professor of Law at the University of Chicago. I will focus my blog post on one of the proposals for reducing interchange fees: the requirement that the fees be disclosed to consumers. I am not sure how seriously this option is taken by the GAO report...

The Incorporation Transparency Act

Posted on December 07, 2009
This post is based on a legal backgrounder I recently published with the Washington Legal Foundation, which is available here. This analysis is cross-posted from the Harvard Law School Forum on Corporate Governance and Financial Regulation. The Incorporation Transparency and Law Enforcement Assistance Act, introduced by Senators Levin, Grassley, and McCaskill and currently pending before the Senate [...

Reminder: The Law and Economics of Interchange Fees and Credit Cards Symposium Starts Tuesday

Posted on December 07, 2009
Just a reminder that our blog symposium begins tomorrow, Tuesday, December 8. The Law and Economics of Interchange Fees and Credit Card Markets For the uninitiated, the interchange fee is the fee charged (usually) by the credit card issuing bank (the cardholder’s bank) to the credit card acquiring bank (the merchant’s bank) to settle a credit card [...

A Sarbox Update

Posted on December 05, 2009
From Larry Ribstein: A few years later, Henry Butler and I wrote a book decrying SOX, and discussing the evidence that was accumulating against it, as well as the SOX suit. Here’s an excerpt from the book abstract: If the suit is successful, Congress likely will have an opportunity to repair the constitutional defect...

I Do Not Think Those Words Mean What You Think They Mean

Posted on December 04, 2009
Here’s Henry Waxman on the federal government saving the newspapers from failing: “The newspapers my generation has taken for granted are facing a structural threat to the business model that has sustained them,” said Representative Henry Waxman, a Democrat from California...

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