Research On The Price Competition Strategy Of Credit Card Market Under Network Externality

Currently, the credit card business has become the focus highly discussed in the competition of the commercial banks. Credit card market which plays an important role in the process of improving capacity of commercial banks and simulating consumption has aroused the public attention; it has also become a factor influencing structural transformation of economy and domestic demand increase, which shows significance to the entire national economy. Credit card market here is a typical two-sided market—issuing market and acquiring market, which is influenced by network externalities effect. And the influence of network externalities can be seen in difference scale of bank credit card pricing. Whereas, studies always ignored the respective research on the difference of credit card scales under network externality, the low effectiveness and efficiency of price competition is still the problem. Therefore, it is needed to recognize the current situation of credit card pricing under network externality from a new perspective in order to make some contribution for the problem mentioned above.First of all, this article made a literature research on the network externality and card price competition in order to achieve the key point to support the study. Then, it goes to the Metcalf test and financial econometrics method which here was adopted to identify and recognize the current credit card market under network externality. Based on the high monopoly situation, the price equilibrium model was followed to deduce the pricing proposition and further empirically analyze the credit card market. The innovation point of this article is shown as followings: Network externality theory is introduced in to credit card for more reasonable price. First time using price equilibrium model for pricing strategy.They are supposed to make benefit to the existing credit card price competition and a critical method for further study in the future.