Perfect Surcharging and the Tourist Test Interchange Fee

Posted by D. Daniel Sokol

Hans Zenger (DG Comp) has published a paper on Perfect Surcharging and the Tourist Test Interchange Fee.

ABSTRACT: Two widely discussed pricing benchmarks in the literature on payment cards markets are the "tourist test" interchange fee (Rochet and Tirole, 2011), which internalizes usage externalities in payment card markets, and "perfect surcharging" by merchants (Rochet and Tirole, 2002). This paper shows that these benchmarks are allocatively equivalent. Implications for the regulatory treatment of interchange fees and no-surcharge rules are discussed.