The No Surcharge Rule and Merchant Competition
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
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Volume (Year): 14 (2014)
Issue (Month): 1 (March)
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