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Perfect surcharging and the tourist test interchange fee

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  • Zenger, Hans

Abstract

Two widely discussed pricing benchmarks in the literature on payment card markets are the "tourist test" interchange fee (Rochet and Tirole, forthcoming), which internalizes usage externalities in payment card markets, and "perfect surcharging" by merchants (Rochet and Tirole, 2002). This paper shows that these benchmarks are allocatively equivalent. Implications for the regulatory treatment of interchange fees and no-surcharge rules are discussed.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 10 (October)
Pages: 2544-2546

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:10:p:2544-2546

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Keywords: Interchange fees Two-sided markets Surcharging Tourist test;

References

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  1. Wilko Bolt & Nicole Jonker & Corry van Renselaar, 2008. "Incentives at the counter: An empirical analysis of surcharging card payment and payment behaviour in the Netherlands," DNB Working Papers 196, Netherlands Central Bank, Research Department.
  2. Rochet, Jean-Charles & Wright, Julian, 2010. "Credit card interchange fees," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1788-1797, August.
  3. Rochet Jean-Charles & Tirole Jean, 2003. "An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-11, June.
  4. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, 03.
  5. Farrell Joseph, 2006. "Efficiency and Competition between Payment Instruments," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-19, March.
  6. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-88, October.
  7. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  8. Gans Joshua S & King Stephen P, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
  9. John Vickers, 2005. "Public policy and the invisible price : competition law, regulation, and the interchange fee," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 231-247.
  10. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  11. Wright, Julian, 2003. "Pricing in debit and credit card schemes," Economics Letters, Elsevier, vol. 80(3), pages 305-309, September.
  12. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
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Citations

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Cited by:
  1. Börestam, Ann & Schmiedel, Heiko, 2011. "Interchange fees in card payments," Occasional Paper Series 131, European Central Bank.
  2. Zenger, Hans, 2012. "Differentiated interchange fees," Economics Letters, Elsevier, vol. 115(2), pages 276-278.
  3. Ardizzi, Guerino, 2013. "Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods," MPRA Paper 48088, University Library of Munich, Germany, revised 25 May 2013.

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