Bourguignon, Hélène, Gomes, Renato and Tirole, Jean (2019) Shrouded transaction costs: must-take cards, discounts and surcharges. International Journal of Industrial Organization, n° 63. pp. 99-144.

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Identification Number : 10.1016/j.ijindorg.2018.10.004


The proliferation of new payment methods on the Internet rekindles the old and unsettled debate about merchants’ incentive and ability to differentiate price according to payment choice. This paper develops an imperfect-information framework for the analysis of platform and social regulation of card surcharging and cash discounting. It makes three main contributions. First, it identifies the conditions under which concerns about missed sales induce merchants to perceive that they must take the card. Second, it derives a set of predictions about cash discounts, card surcharges and platform fees that shed light on existing evidence. Finally, it shows that the optimal regulation of surcharging is related to public policy toward merchant fees and substantially differs from current practice.

Item Type: Article
Language: English
Date: March 2019
Refereed: Yes
Uncontrolled Keywords: Payment cards, cash discounts, card surcharges, hold-ups in two-sided markets, missed sales
JEL Classification: D83 - Search; Learning; Information and Knowledge; Communication; Belief
L10 - General
L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Jul 2019 12:10
Last Modified: 10 Sep 2021 11:32
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