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Most Downloaded Articles
- Container Shipping And Ports: An Overview by Notteboom, Theo E.
- Optimal Monopoly Price Paths with Expanding Networks by Gabszewicz, Jean and Garcia, Filomena
- The Economics of the Online Advertising Industry by Evans, David S.
- Merchant or Two-Sided Platform? by Hagiu, Andrei
- Failure to Launch: Critical Mass in Platform Businesses by Evans, David S. and Schmalensee, Richard
The No Surcharge Rule and Card User Rebates: Vertical Control by a Payment Network
1University of Maryland, College Park, firstname.lastname@example.org
Citation Information: Review of Network Economics. Volume 5, Issue 1, Pages –, ISSN (Online) 1446-9022, DOI: 10.2202/1446-9022.1090, March 2006
- Published Online:
The No Surcharge Rule (NSR) prevents merchants from charging more to consumers who pay by card versus other means ("cash"). We consider a payment network facing local monopolist merchants that serve two consumer groups, card users and cash users. Unlike in prior work, transaction quantities are variable. The NSR raises network profit and harms cash users and merchants; overall welfare rises if and only if the ratio of cash to card users is sufficiently large. With the NSR, the network will grant rebates to card users whenever feasible. If rebates are not feasible, the NSR can harm even card users.