Are We Too Negative on Negative Fees for Payment Cardholders?

44 Pages Posted: 8 May 2018

See all articles by Joshua S. Gans

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Date Written: April 14, 2018

Abstract

This paper examines regulator concerns that cash-paying consumers pay higher retail prices due to so-called ‘negative pricing’ of credit cards that emerge when cardholders face few fees but instead receive discounts, rewards and other inducements for using credit cards for transactions. It is argued here, however, that concerns that might arise in conventional markets over such pricing do not translate over to two-sided networks, of which card networks are a quintessential example.

Keywords: credit cards, two-sided markets, pricing, interchange fee

JEL Classification: L11, L51

Suggested Citation

Gans, Joshua S., Are We Too Negative on Negative Fees for Payment Cardholders? (April 14, 2018). Rotman School of Management Working Paper No. 3162627. Available at SSRN: https://ssrn.com/abstract=3162627 or http://dx.doi.org/10.2139/ssrn.3162627

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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