Shrouded transaction costs: must-take cards,discounts and surcharges |
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| Institution: | 1. MAPP, France;2. Toulouse School of Economics, CNRS, University of Toulouse Capitole, France;3. Toulouse School of Economics, IAST, University of Toulouse Capitole, France;1. Sao Paulo School of Economics - FGV, São Paulo, Brazil;2. Centre for Economic Performance, London, UK;3. PUC-Rio, Rio de Janeiro, Brazil;4. PUC-Rio, Rio de Janeiro, Brazil;1. Toulouse School of Economics, CNRS, 21 allée de Brienne, 31015 Toulouse, France;2. Toulouse School of Economics, Université Toulouse 1 Capitole, 21 allée de Brienne, 31015 Toulouse, France;1. Department of Economics and BEAT, Universitat de Barcelona, Av. Diagonal 696, Barcelona 08034, Spain;2. Department of Economics, University of Piraeus, 80 Karaoli & Dimitriou Str., Piraeus 18534, Greece;3. Center for Advanced Studies in Management and Economics of the Universidade de Évora (CEFAGE-UE), 8 Largo Marquês de Marialva Str., Évora 7000-809, Portugal;1. Department of Economics, Universitat Pompeu Fabra and Barcelona GSE, Ramon Trias Fargas 27, Barcelona 08005, Spain;2. Department of Business, Universidad Carlos III, Madrid 126, Getafe 28903, Spain;1. Economics Department, Frankfurt School of Finance and Management, Adickesallee 32–34, 60322 Frankfurt am Main, Germany;2. Economics Department, University of Munich, Ludwigstr. 28, 80539 Munich, Germany;1. Université Paris Dauphine and Ecole Polytechnique, France;2. EQUIPPE Faculté des Sciences Economiques et Sociales de Lille and MINES ParisTech, PSL — Research University, CERNA — Center for Industrial Economics, France |
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| Abstract: | The proliferation of new payment methods on the Internet rekindles the old and unsettled debate about merchants’ incentive and ability to differentiate price according to payment choice. This paper develops an imperfect-information framework for the analysis of platform and social regulation of card surcharging and cash discounting. It makes three main contributions. First, it identifies the conditions under which concerns about missed sales induce merchants to perceive that they must take the card. Second, it derives a set of predictions about cash discounts, card surcharges and platform fees that shed light on existing evidence. Finally, it shows that the optimal regulation of surcharging is related to public policy toward merchant fees and substantially differs from current practice. |
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