We consider two game-theoretic settings to determine the optimal values of an issuer's interchange fee rate, an acquirer's merchant discount rate, and a merchant's retail prices for multiple products in a credit card network. In the first setting, we investigate a two-stage game problem in which the issuer and the acquirer first negotiate the interchange fee rate, and the acquirer and the retailer then determine their merchant discount rate and retail prices, respectively. In the second setting, motivated by the recent U.S. bill "H.R. 2695," we develop a three-player cooperative game in which the issuer, the acquirer, and the merchant form a grand coalition and bargain over the interchange fee rate and the merchant discount rate. Following the cooperative game, the retailer makes its retail pricing decisions. We derive both the Shapley value- and the nucleolus-characterized unique rates for the grand coalition. Comparing the two game settings, we show that the participation of the merchant in the negotiation process can result in the reduction of both rates. Moreover, the stability of the grand coalition in the cooperative game setting may require that the merchant should delegate the credit card business only to the issuer and the acquirer with sufficiently low operation costs. We also find that the large, highly-specialized merchants and banks are more likely to join the cooperative negotiation whereas the small firms may prefer the two-stage game setting. Our numerical experiments demonstrate that the acquirer's and the issuer's unit operation costs more significantly impact both rates in the cooperative game setting than in the two-stage game setting.

This dissertation investigates the relationship of competition and firms' price responses, by analyzing: i) whether new entry reduces price discrimination, ii) when incumbents reduce price discrimination preemptively in response to the threat of entry, and iii) how competition increases prices. The dissertation consists of three independent essays addressing each of the above questions. The first two essays present an empirical analysis of the airline industry and the third essay presents a theoretical analysis of the credit card industry. In the empirical study of the relationship between competition and firms' pricing in the airline industry, I emphasize the importance of distinguishing the equilibrium behaviors with respect to different market characteristics. Major airlines can price discriminate differently in a market where they compete with low-cost carriers comparing to in another market where they don't, and also they can respond dfferently to the threat of entry depending on whether they are certain about the rival's future entry. The study reveals that competition has a positive effect on price discrimination in the routes where major airlines compete against one anther. In these routes, competition reduces lower-end prices to a greater extent than upper-end prices. In contrast, an entry by low-cost carriers results in a significant negative relationship between competition and price discrimination. Thus, the opposite results in the literature are both evident in the airline industry, and it is very important to identify the different forces of competition on price discrimination. Firms can respond to potential competition as well as actual competition. So, I extend the study to the relationship of potential competition and price discrimination, specially in cases where major airlines compete against one another while facing Southwest's threat of entry. I also attempt to suggest major airlines' motives of reducing price discrimination preemptively. The results of the study suggest that incumbents reduce price dispersion when it is possible to deter the rival's entry and that the potential rival discourages incumbents from deterring entry by announcing before its beginning service. Finally, I examine when competition can increase prices in a market, by analyzing the issuing side of the credit card industry. This industry is characterized by a two-sided market with a platform. Under the no-surcharge rule that restricts merchants to set the same price for cash and card purchases, the equilibrium interchange fee increases with competition. This occurs because issuers can compensate losses from competing on the issuing side by collectively increasing the interchange fee. As a result, limiting competition may improve social welfare when the interchange fee is higher than the social optimal level. In contrast, in the absence of the no-surcharge rule, the analysis shows that competition always improves social welfare by lowering the price of the market.

L’objet de cette thèse est d’analyser l’évolution du marché des paiements de détail avec en toile de fond la constitution d’un espace unique pour les paiements en Europe. Notre analyse révèle notamment que ce marché évolue selon la théorie de la Reine Rouge ; en effet, sous le poids de la concurrence, les prestataires de service ne cessent de créer des moyens de paiement de plus en plus innovants afin de maintenir leur part de marché. Paradoxalement, la demande, elle, évolue plus lentement, essentiellement à cause des habitudes difficiles à changer. Pour la dynamiser, régulateur et industrie bancaire ont mis en œuvre de nombreux moyens. Notre étude révèle ainsi que bien que les facteurs sociodémographiques, technologiques et économiques déterminant les comportements de paiement varient et n’ont pas le même impact d’un pays à un autre, certains Etats présentent néanmoins suffisamment d’homogénéité pour appartenir à une même zone de paiement optimale. En outre, nous démontrons que l’harmonisation des pratiques bancaires et des réglementations mise en place pour la réalisation du marché unique a conduit à une convergence des comportements de paiement en Europe. Par ailleurs, en analysant le cas particulier des paiements par carte, nous développons un modèle multi-agents permettant de mettre en évidence l’importance des pratiques tarifaires telles que la commission d’interchange ou la règle de non-discrimination sur la concurrence entre instruments, intermédiaires et systèmes de paiement. L’expérimentation artificielle de ce modèle dévoile les conditions nécessaires à l’efficacité de la réglementation de ces pratiques par l’Etat. / The purpose of present thesis is to study the evolution of the retail payment market. This work is set against a backdrop of the creation of a single payment area in Europe. Our analysis reveals that this market is subject to the Red Queen dilemma; indeed, because of intense competition, payment service providers are forced to a constant evolution of technology in order to maintain their market share. Paradoxically, the demand for payment instruments tends to move slowly, basically because habits are difficult to change. To improve the dynamism of the demand response to innovation, regulator and banking industry have implemented new policies and procedures that encourage the development of trans-border payments. Thereby, although the sociodemographic, technological and economic factors which influence payment behaviours vary and don't have the same impact from one country to another, we find some remarkable homogeneity across countries that are eligible to form an optimal payment area. Besides, we show that the harmonization of the banking laws and products led to a convergence of the payment behaviours in Europe. In addition, by analyzing the case of the payment card industry, we develop an agent-based model which highlights the effects of the tariff practices such as the interchange fee or the no-surcharge rule, on competition within and between payment systems. The computational simulation of this model reveals necessary conditions to achieve the desired result of the regulation of these practices.