Are We Too Negative on Negative Fees for Payment Cardholders?
44 Pages Posted: 8 May 2018
Date Written: April 14, 2018
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
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