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Merchant Steering of Consumer Payment Choice: Evidence from a 2012 Diary Survey

33 Pages Posted: 3 Dec 2014 Last revised: 3 Jan 2015

Oz Shy

Independent

Joanna Stavins

Federal Reserve Bank of Boston

Date Written: December 30, 2014

Abstract

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

Shy, Oz and Stavins, Joanna, Merchant Steering of Consumer Payment Choice: Evidence from a 2012 Diary Survey (December 30, 2014). Available at SSRN: https://ssrn.com/abstract=2533173 or http://dx.doi.org/10.2139/ssrn.2533173

Oz Shy (Contact Author)

Independent ( email )

No Address Available

Joanna Stavins

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
617-973-4217 (Phone)
617-973-4218 (Fax)

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