Bolt and Chakravorti explain how a payment network operates. Having established the payment network framework, they discuss the costs and benefits of providing and using payment cards relative to various other types of payment instruments. Next, they review the key contributions to the theoretical payment card literature. They consider papers...
Chakravorti and To construct a two-period model to study the interactions among consumers, merchants, and a card issuer. The model yields the following results. First, if the issuer's cost of funds is not too high and the merchant's profit margin is sufficiently high, in every equilibrium of our model the...
Over the last decade, consumers have tripled their use of credit cards as more merchants have increased their acceptance of them. This increase suggests that incentives in today’s marketplace favor greater credit card use by consumers and acceptance by merchants. In this paper, Chakravorti and Shah study the set of...
Chakravorti investigates payments system reforms begun by the Bank of Mexico in 1994. The goals of these reforms are to reduce the amount of uncollateralized intraday credit extended by the Bank of Mexico (previously unlimited), to promote a market-based allocation of intraday credit for interbank payments, and to move large-value...