Lulu Wang

Assistant Professor of finance @KelloggSchool. interested in market power and finance.

[Lulu Wang @luluywang]

@TheStalwart Even if retailers produce to match average demand, the ratio of uncertainty to average demand is higher for more niche demands. There are many times when XXL sells out before M, but they don’t make it to the clearance rack! Survivorship bias rules everything

[Lulu Wang @luluywang]

@XYHan_ @miniapeur My Claude session hit its limit

[Lulu Wang @luluywang]

@bookdepth The problem with CC fees is not just that they create cross-subsidies, but that they don't *need* to be that way. Fees are high because that benefits Visa. Sure, restaurants don't price AC according to your usage, but that doesn't create incentives to raise AC prices

[ProMarket @ProMarket_org]

NEW: @luluywang (@KelloggSchool) writes DOJ's lawsuit against Visa's debit card monopoly may have limited impact. Even if successful, it'll only affect a fraction of merchant fees. More competition could potentially harm both consumers and merchants.

https://t.co/ooIGL5BSaa

[AEA Journals @AEAjournals]

Forthcoming in the AER: "Financial Technology Adoption: Network Externalities of Cashless Payments in Mexico" by Sean Higgins. https://t.co/NFHSY6ny5J

[Kellogg School @KelloggSchool]

When credit cards offer cash back, where is that “free” money really coming from? And why are credit card companies so eager to dole it out? Professor Lulu Wang’s new study shows how and why costs get passed on to consumers. https://t.co/EsMTchWDZg #KelloggLeader

[Lulu Wang @luluywang]

@alz_zyd_ Cool chart! What’s the source?

[Lulu Wang @luluywang]

@scottew @jevgenijs Discounts and surcharges are very different if consumers can’t keep track of which stores do it. Surcharge = holding up a consumer who might have expected to pay the same price. Discount = giveaway that can only help the consumer.

https://t.co/Lc2bUhlvLT

[Lulu Wang @luluywang]

@sytaylor (3) No real effect on Durbin because the settlement rules out surcharging debit cards based on the issuer. Unlikely merchants would start handing out discounts for using your Chase debit card.

[Lulu Wang @luluywang]

@sytaylor (1) Merchants in the US can surcharge all major card brands, but only at the same rate. See players like CardX. Amex explicitly bans surcharging Amex without Visa.
(2) Merch don’t even surcharge credit v debit that often, can you imagine explaining MC World v World Elite?

[Lulu Wang @luluywang]

@JP_Halll Some of it is waking up, but also part of it is fixed costs of setting up card specific pricing. Apparently the fixed costs of credit v debit are large enough that it’s not worth it’s hard to see how V infinite vs signature is any different

[Lulu Wang @luluywang]

V/MC settlement doesn't seem like it will change the structure of the market. The much-hyped modifications to product-level surcharging have been there since 2013. A temporary interchange reduction doesn't change the fact that networks compete for cons, not merch

[Lulu Wang @luluywang]

@terryangelos @aditishekar My take is that it doesn’t change much. The gains from product level surcharging seem small, and this has already been allowed.

[Lulu Wang @luluywang]

V/MC settlement doesn't seem like it will change the structure of the market. The much-hyped modifications to product-level surcharging have been there since 2013. A temporary interchange reduction doesn't change the fact that networks compete for cons, not merch

[Lulu Wang @luluywang]

Biggest barrier to merchant fee competition is that there isn't an ability to charge Visa different from Amex. This means that when Amex raises merchant fees, merchants have a harder time substituting away. Settlement doesn't change that -> no big impact.

[Lulu Wang @luluywang]

The ability to give discounts to particular issuers is interesting. This would mean that merchants could give Chase debit a discount relative to local credit unions b/c Chase debit interchange is lower (due to Durbin). Would be weird to penalize small banks though.

[Lulu Wang @luluywang]

@Jeremy_Kress To what extent are subprime credit cards a product market? Fintechs have made big inroads with personal loans to this market segment. There’s lots of ways to borrow, potentially fewer ways to pay.