Cards on the Table: Efficiency and Welfare Effects of the No-Surcharge Rule

Abstract In Electronic Payment Networks (EPNs), the No-Surcharge Rule (NSR) requires that merchants charge at most the same amount for a payment card transaction as for cash. In this paper, I use a three-party model (consumers, local monopolistic merchants, and a proprietary EPN) with endogenous transaction volumes, heterogeneous card use benefits for merchants and network externalities of card-accepting merchants on cardholders to assess the efficiency and welfare effects of the NSR. I show that the NSR: (i) promotes retail price efficiency for cardholders, and (ii) inefficiently reduces card acceptance among merchants. The NSR can enhance social welfare and improve payment efficiency by shifting output from cash payers to cardholders. However, if network externalities are sufficiently strong, the reduction of card payment acceptance affects cardholders negatively and, with the exception of the EPN, all agents will be worse off under the NSR. This paper also suggests that the NSR may be an instrument to decrease cash usage, but the social optimal policy on the NSR may depend on the competitive conditions in each market.

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Assessing the Social Welfare Effects of Government Transfer Programs: Some International Comparisons

Review of Income and Wealth ◽

10.1111/roiw.12500 ◽

2021 ◽

Author(s):

Nanak Kakwani ◽

Xiaobing Wang ◽

Jing Xu ◽

Ximing Yue

Keyword(s):

Social Welfare ◽

International Comparisons ◽

Welfare Effects ◽

Transfer Programs ◽

Government Transfer ◽

The Social

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Optimal Policy with Heterogeneous Preferences

The B E Journal of Economic Analysis & Policy ◽

10.2202/1935-1682.1947 ◽

2008 ◽

Vol 8 (1) ◽

Cited By ~ 20

Author(s):

Louis Kaplow

Keyword(s):

Social Welfare ◽

Public Goods ◽

Optimal Policy ◽

Income Tax ◽

Social Welfare Function ◽

Income Taxation ◽

Heterogeneous Preferences ◽

Commodity Taxation ◽

Policy Rules ◽

The Social

Abstract Optimal policy rulesincluding those regarding income taxation, commodity taxation, public goods, and externalitiesare typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous. When preference differences are observable, standard second-best results in basic settings are unaffected, except those for the optimal income tax. Optimal levels of income taxation may be higher, the same, or lower on types who derive more utility from various goods, depending on the nature of preference differences and the concavity of the social welfare function. When preference differences are unobservable, all policy rules may change. The determinants of even the direction of optimal rule adjustments are many and subtle.

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Naked Open-Market Manipulation and Its Effects

Global Algorithmic Capital Markets ◽

10.1093/oso/9780198829461.003.0008 ◽

2018 ◽

pp. 199-231 ◽

Cited By ~ 1

Author(s):

Merritt B. Fox ◽

Lawrence R. Glosten ◽

Gabriel V. Rauterberg

Keyword(s):

Social Welfare ◽

Theory Of The Firm ◽

Analytical Framework ◽

Welfare Effects ◽

Market Manipulation ◽

Open Market ◽

Central Question ◽

Federal Law ◽

Trading Activity ◽

The Social

More than 80 years after US federal law first addressed stock market manipulation, there is still dispute about manipulation law’s foundational principles; this chapter aims to provide clarity by offering an analytical framework for understanding a specific manipulation. There has been a sharp split among the federal circuits concerning manipulation law’s central question: Can trading activity alone ever be considered illegal manipulation? Economists and legal scholars do not agree on whether manipulation is possible in principle, let alone on how to address it properly in practice. The framework offered by this chapter aims to help clarify federal law and may guide regulators in successfully prosecuting financial law’s most intractable wrong. We draw on the tools of microstructure economics and the theory of the firm to provide an analysis of a particular form of manipulation, identify who is harmed by it, and evaluate the social welfare effects.

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Sustainable Growth of Payment Card Networks: A Two-Sided Market Approach

Journal of Business Strategies ◽

10.54155/jbs.24.2.165-191 ◽

1970 ◽

Vol 24 (2) ◽

pp. 165-191

Author(s):

Mingchun Sun ◽

Edison Tse

Keyword(s):

Social Welfare ◽

Dynamic Systems ◽

Strategic Alliance ◽

Network Externalities ◽

Merger And Acquisition ◽

Sustainable Growth ◽

Pricing Strategies ◽

Payment Card ◽

Market Approach ◽

Two Sides

The payment card industry is a typical "two-sided market" where two groupsof agents (i.e. merchants and cardholders) interact with each other via a commonnetwork platform (i.e. a card network) and the value of participating in thenetwork for agents in one group depends on the number of participants from theother group. The positive network externalities across the two sides create the"chicken-and-egg problem": without sufficient merchants accepting a particularcard network, few consumers are willing to apply for the card; without sufficientcardholders, few merchants are willing to accept the card. While economists haveaddressed the issue from social welfare perspective, we focus on business strategyimplications. Modeling network externalities in dynamic systems, we show thatnetwork platform owners could overcome the' 'chicken-and-eggproblem" throughstrategies such as merger and acquisition, licensing, forming strategic alliance,as well as adjusting product and pricing strategies, etc. We provide a history ofthe U.S. payment card industry as empirical evidences to support our findings.

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Analysis of the Social Welfare Effect of Environmental Regulation Policy Based on a Market Structure Perspective and Consumer

Sustainability ◽

10.3390/su12010104 ◽

2019 ◽

Vol 12 (1) ◽

pp. 104

Author(s):

Lijie Wang ◽

Jianjun Lu

Keyword(s):

Social Welfare ◽

Market Structure ◽

Scenario Analysis ◽

Consumer Preferences ◽

Environmentally Friendly ◽

Welfare Effects ◽

Welfare Effect ◽

Environmental Tax ◽

The Social ◽

The Government

With the implementation of regulatory policies, some new problems are emerging, such as uneven governance effects, large differences in economic growth, and social welfare inequalities. In order to promote the sustainable development of both the economy and the environment, it is necessary to provide theoretical explanations for the above phenomena. Thus, this paper constructs a theoretical model of social welfare effects based on the Cournot model. Additionally, the scenario analysis method is used to analyze the social welfare effects of environmental control policies from the perspective of market structure and consumer preferences. The findings of the scenario analysis are as follows: (1) the social welfare effect of environmental subsidy policy is greater than the social welfare effect of environmental tax policy when the absolute difference between the external value of environmentally friendly goods and non-environmental goods is less than 7.4 units and (2) the implementation of environmental subsidy policies or environmental tax policies will improve social welfare when the market structure is a completely competitive market and when both of the externalities of environmentally friendly commodities and non-environmental commodities are not the same at intervals (0, 0.335) and (−0.335, 0). We conclude that (1) the government should consider externalities, market powers, and consumer preferences when implementing environmental regulation policies and (2) the government can achieve a trend toward the development of environmentally friendly goods by guiding consumer preferences and harnessing market power.

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