OPTIMAL FEE DETERMINATION IN A PERSPECTIVE PAYMENT SYSTEM: A GAME THEORETICAL APPROACH

e setup (or the reform) of a payment system induces con icts among the main stakeholders over governance, access, service provision, pricing, com- pliance issues, and funding. In this paper, we focus on the vertical con icts that may arise among system providers (for instance, Central Banks), system participants (for instance, banks), and end-users (consumers) when the fee system of a perspective payment system must be designed. In particular, we use game theoretical tools to model such con icts and to derive the equi- librium fee system, that is the fees to be charged by system providers to sys- tem participants and by system participants to end-users. Initially, we let the system provider and the system participant choose their fees simultaneously (simultaneous move case); then, we force the system provider to commit to a certain level of fees in advance (sequential move case). Two important results arise. First, if the system provider and the system participant set their fees simultaneously, the outcome of their strategic interaction is not Pareto opti- mal. In particular, both the system provider and the system participant would be better o by setting lower fees. Second, if the system provider commits - i.e., sets the fees to the system participant in advance -, then it is possible to achieve a Pareto improvement.