Perfect Surcharging and the Tourist Test Interchange Fee
Charles River Associates (CRA)
February 14, 2011
Journal of Banking and Finance, Vol. 35, No. 10, pp. 2544-2546, 2011
Two widely discussed pricing benchmarks in the literature on payment cards markets are the "tourist test" interchange fee (Rochet and Tirole, 2011), 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.
Number of Pages in PDF File: 10
Keywords: Perfect surcharging, tourist test, interchange fee, payment cards, payment cards markets
Date posted: May 26, 2011 ; Last revised: August 2, 2011
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