The No Surcharge Rule and Merchant Competition

Frans Saxén ()

Journal of Industry, Competition and Trade, 2014, vol. 14, issue 1, 39-66

Abstract: We analyze the no surcharge rule (NSR) and its impact on merchant competition by comparing different surcharging regimes. Any constraint on surcharging, including the NSR is shown to be a competition-softening device. A NSR may induce socially excessive card use. Allowing imperfectly competitive merchants to surcharge may lead to socially too little card use. Under a NSR, increased cost of card acceptance increases all prices, even the prices of a merchant not accepting cards. Under the NSR cards yielding no social surplus may be viable. This is not the case without the NSR. Card-use rewards may hurt consumers. Copyright Springer Science+Business Media New York 2014

Keywords: No surcharge rule; Retail financial services; Payment card networks; Debit cards; Credit cards; Surcharging; G21; E42; L42 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10842-013-0151-3

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