In an earlier article, Ingene and Levy outlined the optimal discount that retailers should offer to induce cash rather than credit card payment. Here it is shown that, on the basis of more careful estimates of the cost differentials of cash and credit card sales, and more likely estimates of the proportions of cash and card payments, retailers generally will not find it profitable to offer cash discounts.
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References
1.
Federal Reserve System, Board of Governors (1983), Credit Cards in the U.S. Economy: Their Impact on Costs, Prices, and Retail Sales, Washington: U.S. Government Printing Office.
2.
GrantR. M. (1983), “Transaction Costs to Retailers of Different Methods of Payment. Results of a Pilot Study,”Managerial and Decision Economics, 4 (no. 4), 89–100.
3.
IngeneCharles A., and LevyMichael (1982), “Cash Discounts to Retail Customers: An Alternative to Credit Card Sales,”Journal of Marketing, 46 (Spring), 92–103.
