Credit and the no-surcharge rule
Abstract: A controversial aspect of payment cards has been the ?no-surcharge rule.? This rule, which is part of the contract between the card provider and a merchant, states that the merchant cannot charge a customer who pays by card more than a customer who pays by cash. In this paper we consider the design of an optimal card-based payment system when cash is available as an alternative means of payment. We find that a version of the no-surcharge rule emerges as a natural and advantageous feature of such a system.
File(s): File format is application/pdf http://www.frbatlanta.org/filelegacydocs/wp0625.pdf
Provider: Federal Reserve Bank of Atlanta
Part of Series: FRB Atlanta Working Paper
Publication Date: 2006