Year: 2006
Type: article
Abstract: This paper presents models that explain why merchants accept payment cards even when the fees they face exceed the transactional benefits they receive from a card transaction. The prevalent assumption merchants accept cards only when they earn positive net transactional benefits holds only for a monopoly merchant who faces an inelastic consumer demand. The paper also explores possible explanations for the recent gradual increases in merchant fees in the United States. Three possible explanations are 1) inflexible product price setting by merchants, 2) decreases (increases) in cardholder fees (rebates), and 3) increases in cardholding-customer proportion in a given industry.
Source: Review of Network Economics
Author: Fumiko Hayashi
Institutions: Federal Reserve, Federal Reserve Bank of Kansas City
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W1964755494