Payment Discounts and Surcharges: The Role of Consumer Preferences Payment Discounts and Surcharges: The Role of Consumer Preferences

By Joanna Stavins and Huijia Wu

Shy and Stavins (2015) showed that in 2012 U.S. merchants rarely took advantage of their recent freedom to differentiate prices based on the method of payment use. The authors of this paper use new data from the 2015 Diary of Consumer Payment Choice to analyze price discounts and surcharges based on the payment method used for transactions. They examine consumer preferences for specific payment instruments and test whether consumer demand for payment instruments is price elastic—specifically, whether consumers are likely to deviate from their preferred methods in order to obtain a discount or avoid a surcharge.

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