Do the Poor Pay for Card Rewards of the Rich?
Malte Krüger, University of Applied Sciences Aschaffenburg, 2015-06-15
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, models with product differentiation are used to show that rich card-holders may actually be paying for their card rewards themselves. In this case, there is no perverse distribution effect.
year: | 2015 |
volume: | 66, Issue 2 |
pages: | 129-154 |
JEL: | L15, L41, G29 |
keywords: | card_rewards surcharging two-sided_markets vertical_product_differentiation |
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