Journal of Industry, Competition and Trade

, Volume 14, Issue 1, pp 39–66 | Cite as

The No Surcharge Rule and Merchant Competition

  • Frans Saxén


We analyze the no surcharge rule (NSR) and its impact on merchant competition by comparing different surcharging regimes. Any constraint on surcharging, including the NSR is shown to be a competition-softening device. A NSR may induce socially excessive card use. Allowing imperfectly competitive merchants to surcharge may lead to socially too little card use. Under a NSR, increased cost of card acceptance increases all prices, even the prices of a merchant not accepting cards. Under the NSR cards yielding no social surplus may be viable. This is not the case without the NSR. Card-use rewards may hurt consumers.


No surcharge rule Retail financial services Payment card networks Debit cards Credit cards Surcharging 

JEL Classification

G21 E42 L42 



I would like to thank Rune Stenbacka, Harry Leinonen, participants at the FDPE Microeconomics and Industrial Organization Workshop in Helsinki, and an anonymous referee for helpful and insightful comments.


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Department of EconomicsHanken School of EconomicsHelsinkiFinland

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