Optimal pricing of payment services

Cyril Monnet () and William Roberds

Journal of Monetary Economics, 2008, vol. 55, issue 8, pages 1428-1440

Abstract: Payments are increasingly being made with payment cards despite the fact that the cost of clearing a card payment usually exceeds the cost of transferring cash. We examine this puzzle through the lens of monetary theory. We consider the design of an optimal card-based payment system when cash is available as an alternative means of payment. We find that a feature akin to the controversial "no-surcharge rule" may be necessary to ensure the viability of the card payment system. This rule states that merchants cannot charge a customer who pays by card more than a customer who pays by cash.

Keywords: Payment; Credit; card; Debit; card; No-surcharge (search for similar items in EconPapers)
Date: 2008

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Persistent link: http://EconPapers.repec.org/RePEc:eee:moneco:v:55:y:2008:i:8:p:1428-1440

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