Abstract

http://ssrn.com/abstract=2342593
 


 



The Impact of the U.S. Debit Card Interchange Fee Caps on Consumer Welfare: An Event Study Analysis


David S. Evans


University of Chicago Law School; University College London; Global Economics Group

Howard H. Chang


Global Economics Group, LLC

Steven Joyce


Global Economics Group, LLC

October 23, 2013

University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 658

Abstract:     
The cost to merchants of taking payment on debit cards declined by more than $7 billion annually as a result of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, while the effective cost to issuers of providing debit card services to consumers increased by a corresponding amount. This paper reports an event-study analysis of stock prices to determine the impact on consumers of the Durbin Amendment. Did consumers gain more from cost savings passed on by merchants, in the form of lower prices and better services, than they lost from cost increases passed on by banks, in the form of higher prices or less service? We find that consumers lost more on the bank side than they gained on the merchant side. Our estimate is that, based on the expectations of investors, the present discounted value of the losses for consumers as a result of the implementation of the Durbin Amendment is between $22 and $25 billion.

Number of Pages in PDF File: 60

Keywords: interchange fees, payment cards, debit cards, two-sided markets, multi-sided platforms, Durbin Amendment, price caps, financial regulation

JEL Classification: G28, G21, G18, K23, L51, L52, L78

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Date posted: October 26, 2013  

Suggested Citation

Evans, David S. and Chang, Howard H. and Joyce, Steven, The Impact of the U.S. Debit Card Interchange Fee Caps on Consumer Welfare: An Event Study Analysis (October 23, 2013). University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 658. Available at SSRN: http://ssrn.com/abstract=2342593 or http://dx.doi.org/10.2139/ssrn.2342593

Contact Information

David S. Evans (Contact Author)
University of Chicago Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
University College London ( email )
London WC1E OEG
United Kingdom
Global Economics Group ( email )
1400 S. Dearborn, Suite 400
Chicago, IL 60603
United States
Howard H. Chang
Global Economics Group, LLC ( email )
1400 S. Dearborn, Suite 400
Chicago, IL 60603
United States
312-533-4602 (Phone)
HOME PAGE: http://www.globaleconomicsgroup.com
Steven Joyce
Global Economics Group, LLC ( email )
1400 S. Dearborn, Suite 400
Chicago, IL 60603
United States
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