Essays on the industrial organization of the credit card market

In Chapter 1, I study the regulation of interchange fees in the U.S. credit card market empirically. I develop a structural model with heterogeneous consumers and competing issuers and estimate it using a combination of micro and macro data on credit card pricing and demand. The empirical model generates cross-elasticities for competing issuers and cost parameters for credit card services. I use counterfactual experiments to predict the impact of interchange fee regulation. The results indicate that reducing the fees by 50 basis points raises the mean interest rate by 40 basis points, thereby leading to a 2.9% decline in credit card debt and a 2.7% fall in transactions.;In Chapter 2, I examine the use of fixed vs. variable rate pricing by credit card issuers. I match profit data from the Call Reports filed by the banks with credit card pricing data. The data indicates that larger banks choose variable interest rates more often. I study the implications of the choice between fixed and variable rates on bank profit margins, demand for debt and charge-offs for large and small banks.;In Chapter 3, I develop a theoretical model of competition between open and closed credit card networks and use it to characterize the optimal interchange fee chosen by the open network. The results suggest that the optimal fee depends critically on the extent of demand substitution between the competing card issuers.