Payment Platforms and Pricing: When Does a 'One Price Rule' Help Consumers?

Abstract

Should a payment intermediary (e.g. American Express, PayPal, etc.) be allowed to require merchants to charge the same price for customers who pay via the platform as they charge other customers? We build a model that highlights certain under-appreciated aspects of this questions. Taking these into account, we find that such platform-imposed requirements may benefit consumers in ways that recent work on the topic has overlooked. A central aspect of our approach is to draw connections between this question, as it relates to payment platforms, and recent, more abstract work on third-degree price discrimination.

Keywords: Platforms, Payment Intermediaries, Electronic Payments, Price Coherence, Third-Degree Price Discrimination, Demand Curvature