Feedback Loop Effects in Payment Card Markets: Empirical Evidence

While some studies have assumed that mature and well-established platforms do not exhibit feedback loop effects, other recent contributions have suggested that these effects may exist. Using a unique database that provides detailed information on both cardholder and merchant sides of the Spanish payment card market, we find empirical evidence of feedback loop effects. We also offer some evidence on the relative value that consumers (merchants) place on network characteristics such as the degree of merchant acceptance (cardholder adoption) and prices.