Merchant Steering of Consumer Payment Choice: Evidence from a 2012 Diary Survey
33 Pages Posted: 3 Dec 2014 Last revised: 3 Jan 2015
Date Written: December 30, 2014
This paper seeks to discover whether U.S. merchants are using their recently granted freedom to offer price discounts and other incentives to steer customers to pay with methods that are less costly to merchants. Using evidence of merchant steering based on the 2012 Diary of Consumer Payment Choice, we find that only a very small fraction of transactions received a cash or debit card discount, and even fewer were subjected to a credit card surcharge. We attribute this finding in part to the merchants’ fear of alienating consumers, who may not view the steering attempts as an “acceptable norm.” Transactions at gasoline stations were more likely to receive either cash discounts or credit card surcharges than transactions in other sectors. Transactions over $20 were significantly more likely to receive a cash discount.
Keywords: Payment choice, social norms, merchant behavior, consumer behavior, discounting and surcharging
JEL Classification: D03, D14, G02
Suggested Citation: Suggested Citation