Credit cards only work because one side of the market subsidizes the other

A two-sided market needs both groups on the same platform at once, so the split of the price matters more than its total. Rochet and Tirole showed platforms often price one side near or below cost, cardholders paying little, while charging merchants more, to get both sides to join. The same logic prices app stores, dating apps and ad-supported media today.

— Jean-Charles Rochet and Jean Tirole, Platform Competition in Two-Sided Markets — Journal of the European Economic Association, 2003

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