Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104787
Authors: 
Krueger, Malte
Year of Publication: 
2014
Series/Report no.: 
ROME Discussion Paper Series 14-08
Abstract: 
Card payment systems are sometimes accused of taking from the poor and giving to the rich. The argument is as follows: High card fees are leading to higher retail prices for both, card users and cash users. However, high income card holders are receiving rewards when purchasing by card. The result may be a net transfer of, mostly low-income, cash users to, mostly high-income, card users. In this article a model with monopolist product differentiation is used to show that rich card holders may actually be paying for their card rewards themselves. In this case, there is perverse distribution effect.
Subjects: 
two-sided markets
card rewards
cross-subsidy
pricing strategies
JEL: 
L15
L41
G29
Document Type: 
Working Paper

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