The Economics of Credit Cards

By Todd Zywicki on March 17, 2011

Dr. Todd Zywicki, Director at Global Economics Group, clarifies the underlying economics of credit cards and credit card use. In The Economics of Credit Cards (Chapman Law Review, Vol. 3:79), Dr. Zywicki demonstrates that the credit card market is almost certainly competitive, and shows that both consumers and issuers have responded rationally to a powerful financial innovation. He also shows that consumer demand, not issuers’ collective market power, drives the competitive process. The Economics of Credit Cards