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Who pays for credit cards?

The authors archetype side payments in a competitive credit-card market. If competitive retailers absorb the take away from of accepting credit cards by dint of charging a higher goods price to everyone then someone must subsidize convenience users of credit cards to intercept them from defecting to merchants who do not accept cards. The side payment could be financed by dint of card users who roll above balances and pay interest. It is rational for them to do in the way that if their subjective discount rates are high enough. Charging different prices to different customers based upon the underlying cost of the payment instrument would be more efficient


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