Do the poor pay for card rewards of the rich?

Arbeitspapier

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 a model with monopolist product differentiation is used to show that rich card holders may actually be paying for their card rewards themselves. In this case, there is perverse distribution effect.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ROME Discussion Paper Series ; No. 14-08

Classification and Topics

• Classification: Wirtschaft ; Information and Product Quality; Standardization and Compatibility ; Monopolization; Horizontal Anticompetitive Practices ; Financial Institutions and Services: Other
• Subject: two-sided markets ; card rewards ; cross-subsidy ; pricing strategies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Krueger, Malte
• Event: Veröffentlichung
• (who): Research On Money in the Economy (ROME)
• (where): s.l.
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/104787
• Last update: 10.03.2025, 11:44 AM CET