Eureka Case 27 min Undergrad

The Network Fee

You're the director of a payments platform in Buenos Aires. You connect merchants and consumers, and must set the per-transaction fee (the take rate). The board, watching the margin, wants to raise it: "every point of fee is profit." But your platform is worth what its network is worth —the more merchants and users, the more useful for everyone— and too high a fee kills it before it grows.

The situation

A payments platform is a two-sided market with network effects: every merchant that joins makes the network more valuable for users, and vice versa. The fee you charge per transaction cuts both ways: it raises your revenue per operation, but it slows volume —merchants and users who don't join, or who leave. Raise it too much and you choke the very network effect that gives you value.

Here's the trap that tempts the board. The fee that maximizes your short-term revenue per transaction is NOT the one that maximizes platform value. Long-term value comes from network scale and from monetizing adjacent services (loans, payroll, data, software) on top of a huge user base. That base is only built with low friction. M-PESA and Square grew by keeping the fee low and monetizing scale later. Charging a lot early is selling the future for today's margin.

Your job in this case: see how volume, short-term revenue, and long-term platform value respond to the fee, and set it. The question isn't which fee squeezes the most out of every transaction, but which one builds the network that's genuinely worth something.

The decision

What fee do you set?

  • A · High fee: maximize the per-transaction margin
  • B · The fee that maximizes short-term revenue
  • C · Low fee: win the network and monetize scale later

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