Imposing Choice on the Uninformed: The Case of Dynamic Currency Conversion

Over the course of past two decades, it has become a common experience for consumers authorizing an international transaction via credit card to be invited choose currency in which they wish executed. While this choice, made feasible by technology known as dynamic conversion (DCC), seems foster competition, we argue that opposite is case. In fact, unique pure-strategy equilibrium natural fee-setting game, with uninformed and possibly inattentive consumers, turns out highly asymmetric, entailing fees service provider persistently exceed monopoly level. Although losses welfare may substantial, regulatory solution unlikely come about due global free-rider problem.