TY - UNPB

T1 - Analysis of electronic micro-payment market

AU - See-To, E W K

AU - Jaisingh, J

AU - Tam, K Y

PY - 2006

Y1 - 2006

N2 - 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.

AB - 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.

KW - network externalities

KW - two-sided market

KW - micro-payment systems

KW - smart card technology

KW - electronic cash

KW - game theory

M3 - Working paper

T3 - Management Science Working Paper Series

BT - Analysis of electronic micro-payment market

PB - The Department of Management Science

CY - Lancaster University

ER -