Perfect Surcharging and the Tourist Test Interchange Fee
10 Pages Posted: 26 May 2011 Last revised: 19 May 2018
Date Written: February 14, 2011
Abstract
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.
Keywords: Perfect surcharging, tourist test, interchange fee, payment cards, payment cards markets
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