Priceless? The Competitive Costs of Credit Card Merchant Restraints

Adam Levitin has written a second paper examining rewards cards titled "Priceless? the Competitive Costs of Credit Card Merchant Restraints".

From the abstract: "Credit card transactions cost American merchants six times as much as cash transactions. Why, then, do consumers pay the same price for purchases, regardless of the means of payment? The answer lies in a set of credit card network rules known as merchant restraints. Merchant restraints forbid merchants from surcharging for credit and discounting for non-cash payments, while the framing effect, a well-documented cognitive bias, makes discounting for cash ineffective. Merchant restraints thus prevent merchants from pricing according to consumers' payment method and from signaling to consumers the costs of different payment methods. Accordingly, consumers never internalize the costs of their choice of payment system."