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Analysis of electronic micro-payment market

See-To, E W K and Jaisingh, J and Tam, K Y (2006) Analysis of electronic micro-payment market. Working Paper. The Department of Management Science, Lancaster University.

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    Abstract

    Despite the potential of micro-payment systems very few systems have been successful. Little is known about the reasons behind the successful few and the failures of the majority. Micro-payment markets exhibit two-sided network externalities and the underlying dynamics of these markets are not very well understood. Based on a stylized model of two-sided market, we find that there is a 'survival mass' of merchants and users for a micro-payment system to exist and a 'critical mass' for the acceptance levels to take off and remain stable. We also find the non-intuitive result that lowering the user-side adoption cost will actually reduce the chances for the micro-payment market to develop. Subsidization alone cannot create a micro-payment market. Anecdotal evidence supports this finding. When subsidization is needed, the user side will normally be subsidized. The two-sided market structure makes comparative analysis complex and non-trivial, rendering the implementation of micro-payment systems very difficult as indicated by the mixed results of a number of initiatives worldwide.

    Item Type: Monograph (Working Paper)
    Uncontrolled Keywords: network externalities ; two-sided market ; micro-payment systems ; smart card technology ; electronic cash ; game theory
    Subjects: UNSPECIFIED
    Departments: Lancaster University Management School > Management Science
    ID Code: 48862
    Deposited By: ep_importer_pure
    Deposited On: 11 Jul 2011 22:16
    Refereed?: No
    Published?: Published
    Last Modified: 27 Jul 2012 01:16
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/48862

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