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Credit and the no-surcharge rule

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  • Cyril Monnet
  • William Roberds

Abstract

A controversial aspect of payment cards has been the ?no-surcharge rule.? This rule, which is part of the contract between the card provider and a merchant, states that the merchant cannot charge a customer who pays by card more than a customer who pays by cash. In this paper 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 version of the no-surcharge rule emerges as a natural and advantageous feature of such a system.

Suggested Citation

  • Cyril Monnet & William Roberds, 2006. "Credit and the no-surcharge rule," FRB Atlanta Working Paper 2006-25, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2006-25
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    File URL: https://www.frbatlanta.org/-/media/documents/research/publications/wp/2006/wp0625.pdf
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    References listed on IDEAS

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    Cited by:

    1. Thorsten Koeppl & Cyril Monnet & Ted Temzelides, 2007. "A dynamic model of the payment system," Working Papers 07-22, Federal Reserve Bank of Philadelphia.
    2. Antoine Martin & Michael Orlando & David Skeie, 2008. "Payment networks in a search model of money," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 104-132, January.
    3. Frans Saxén, 2014. "The No Surcharge Rule and Merchant Competition," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 39-66, March.

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