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and exit in the market, and the elasticity of the product. For each category, state the ways the credit card issuing industry is consistent with the characteristics of perfect competition and what ways it is not.

and exit in the market, and the elasticity of the product. For each category, state the ways the credit card issuing industry is consistent with the characteristics of perfect competition and what ways it is not.

Microeconomics A Contemporary Intro
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter9: Monopoly
Section: Chapter Questions
Problem 3QFR
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Please answer the first two questions. 

1. Think about the following categories: number of firms, type of product, pricing, market knowledge, entry and exit in the market, and the elasticity of the product. For each category, state the ways the credit card issuing industry is consistent with the characteristics of perfect competition and what ways it is not. 

2. Do some research and use your own experience to cite some ways the credit card industry has changed over the past ten years.

Debit and Credit Card Industry When people think of the credit card and debit card industry, they think of four main companies: Visa, MasterCard, American Express, and Discover. These companies represent the credit card network side of the industry. Another side of the industry, the credit card issuers, are far greater in number and exhibit some characteristics of a perfectly competitive market. Credit card issuers are the financial institutions that back consumers' payments. Issuers approve applications and establish credit limits and interest rates. They provide any perks related to the card and collect payments. You can choose cards from over six thousand credit issuers. Think of all the banks and credit unions that offer cards. (Retailer cards are generally backed by a bank.) As of 2019, 70% of the U.S. population had at least one credit card. In fact, many people have multiple cards. Approximately 1.89 billion credit cards are in use in the United States and $3.8 trillion in purchases were charged on credit cards in 2018. Credit cards all serve a similar function, they provide payment in lieu of cash, and have a similar appearance. Retailers do not look at who issues your card; generally, they are concerned only with the payment going through. As evidenced by the number of credit issuers, it is easy to enter the credit origination market. Further, with so many issuers, companies can sell their accounts and exit the market with ease. The large number of issuers ensure interest rates remain competitive. Further, interest rate incentives and other purchasing incentives are known, can easily be evaluated by consumers, and often are similar if not identical between cards. RA
Transcribed Image Text:Debit and Credit Card Industry When people think of the credit card and debit card industry, they think of four main companies: Visa, MasterCard, American Express, and Discover. These companies represent the credit card network side of the industry. Another side of the industry, the credit card issuers, are far greater in number and exhibit some characteristics of a perfectly competitive market. Credit card issuers are the financial institutions that back consumers' payments. Issuers approve applications and establish credit limits and interest rates. They provide any perks related to the card and collect payments. You can choose cards from over six thousand credit issuers. Think of all the banks and credit unions that offer cards. (Retailer cards are generally backed by a bank.) As of 2019, 70% of the U.S. population had at least one credit card. In fact, many people have multiple cards. Approximately 1.89 billion credit cards are in use in the United States and $3.8 trillion in purchases were charged on credit cards in 2018. Credit cards all serve a similar function, they provide payment in lieu of cash, and have a similar appearance. Retailers do not look at who issues your card; generally, they are concerned only with the payment going through. As evidenced by the number of credit issuers, it is easy to enter the credit origination market. Further, with so many issuers, companies can sell their accounts and exit the market with ease. The large number of issuers ensure interest rates remain competitive. Further, interest rate incentives and other purchasing incentives are known, can easily be evaluated by consumers, and often are similar if not identical between cards. RA
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