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Perfect surcharging and the tourist test interchange fee

  • Zenger, Hans

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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  1. 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.
  2. Rochet, Jean-Charles & Wright, Julian, 2009. "Credit card interchange fees," Working Paper Series 1138, European Central Bank.
  3. Wright, Julian, 2003. "Pricing in debit and credit card schemes," Economics Letters, Elsevier, vol. 80(3), pages 305-309, September.
  4. Julian Wright, 2001. "The Determinants of Optimal Interchange Fees in Payment Systems," Industrial Organization 0108001, EconWPA.
  5. 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.
  6. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  7. Bolt, Wilko & Jonker, Nicole & van Renselaar, Corry, 2010. "Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1738-1744, August.
  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. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  10. 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.
  11. 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.
  12. Farrell Joseph, 2006. "Efficiency and Competition between Payment Instruments," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-19, March.
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