The proliferation of new payment methods on the Internet rekindles the old and unsettled debate about merchants’ incentive and ability to differentiate price according to payment choice. This paper develops an imperfect-information framework for the analysis of platform and social regulation of card surcharging and cash discounting. It makes three main contributions. First, it identifies the co...

Based on the well-known fact that social networks can provide effective mechanisms that help to increase the trust level between two trade partners, we apply a simple game-theoretical framework to derive transaction costs as a high risk of opportunistic behavior in a repeated trade relation determined by the density and size of trading networks. In the empirical part of the paper we apply a two...