Why Do Debit Card Networks Charge Percentage Fees?
Why do debit card networks base their fees on a percentage of transaction amounts when the marginal cost of executing a transaction does not vary by amount? Research suggests that this type of fee structure, a linear ad valorem fee, maximizes profits for card networks by allowing price discrimination. Also, because percentage fees make card usage more economical for lower-value transactions, such a fee structure tends to increase social welfare.
Year of publication: |
2013
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Authors: | Price, David A. ; Wang, Zhu |
Published in: |
Richmond Fed Economic Brief. - Federal Reserve Bank of Richmond. - 2013, Feb, p. 1-3
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Publisher: |
Federal Reserve Bank of Richmond |
Saved in:
freely available
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