Research On A Bankcard Network's Discrimination Pricing Model

Bankcard network is a system made up with the participants of card schemes, issuers, acquirers, merchants and cardholders.A bankcard network's pricing is a multi-phrase decision processs, which is first individually decided by issurers, acquirers and card schemes, who will then share the revenues by collectively setting interchange fees. In practice, bankcard networks'pricing is closely related with the prosperity of the bankcard transactions market. In theory, bankcard networks'pricing is a key issue in the fields of electronic payments. Therefore, bankcard network's pricing is chosen to be the main topic of this paper.Generally speaking, the difficult points of the research work lie in the following aspects: the special characteristics of the network should be included, the different goals of various participants should be considered, the complementary demand of cardholders and merchants should be researched, the dynamic and complex relationship of the different fees should be thought systematically, and the mutual relationship of the demand and prices should be coordinated effectively. Therefore, the main factors which affect the pricing are analyzed first so as to construct the pricing model reflecting the multi-participant, multi-factor, multi-price, multi-condition and multi-phrase features by combination the theoretical and empirical methods with the simulation tools.The main contents are as follows:(1) Research on the influencing factors and their effects'mechanism on pricing decisions. According to the special characteristics of the network and the complexity of the pricing, the paper first researched the bilateral features of the network, the complex relationship of the various influencing factors, the dynamic and complex relationship of the fees such as card schemes'fee, interchange fee, merchants service fee and cardholders'fee, and the several kinds of externalities. Further, the effects of the factors such as cost, demand, competition and policies on the pricing processs are researched in order to reveal the mechanism of their relative relationship so as to indicate the necessity of discrimination pricing and the relative research framework, and provide the theoretical and empirical foundation for the model construction of the discrimination pricing.(2) Research on the compound decision model of a bankcard network's pricing. The pricing principle is given first on the basis of the price discrimination theories. And then the three-element compound pricing decision model is constructed based on the analysis of the merchants'classification, the discount interzones of transaction scales, and the fees per transaction and per value. Simultaneously, the pricing model, which consists of four parts such as optimizing classification of merchants, separately pricing debit cards and credit cards, adjusting the prices according to transactions scale, and introducing two-part pricing method, is given by applying the mathematical and statistical methods to the analysis of China's bankcard transaction data. The purposes are to realize the coordination of different merchants, different card products, different transaction scales, and the implications of the transaction volumn and value.In the end, the suggestions about the price level under the China's current market situation are provided on the basis of the above methods.(3) Research on the simulation model of a bankcard network pricing. In order to analyze the different countermeasures under different market situations, the System Dynamics method is introduced to research the components and their relations of the bankcard network pricing system are analyzed. The level variables and the flow variables are selected, which are based on the analysis of the costs and benefits of different participants, the utility constraints of the merchants and cardholders, and the effects of the transactions scale and cards issuance number. Then the System Dynamics model of the Bankcard Network pricing is constructed and analyzed. Further, the reasonability of the model is researched by the history data simulation and sensitive analysis.(4) Research on the discrimination pricing countermeasures of a bankcard network. The discrimination models constructed in this paper are applied to analyze the discrimination pricing countermeasures of China's bankcard network under different market conditions and various participants'countermeasures. The analysis of the pricing changes of the card schemes, issuers and acquirers and the utility changes of the merchants and cardholders are analyzed by comparing the different results of models'operation, which will then give the optimal countermeasures of bankcard network discrimination pricing.This paper contributes by providing more applicable bankcard networks'pricing model and simulation tools for card schemes, commercial bankds and regulation departments, by forming a new research method, by widening the application fields of the two-sided market theory, and by improving the combination of the electronic payments and pricing theories.