Tuesday, July 22, 2008

Why Did This Take So Long To Happen?

Gas Stations charging higher prices for credit card purchases. The cost of delivering a gallon of gas to the consumer increases when that consumer pays with credit, so why has it not always been the case? The likely reason is that the higher wholesale price of gas has risen enough to make the separation of prices economically sensible. The cost of posting separate prices, proper accounting costs, and greater labor costs (credit cards reduce the number of cashiers needed at peak points of the day/week) have only recently been surpassed by the cost of paying out a percentage of credit transactions to those firms.

1 comment:

Matt M said...

Just to note, firms must offer "cash discounts" not "credit surcharges". I'm not sure if that has anything to do with the recent increase in cash discounts, but it's interesting nonetheless!

One final note: Having separate prices probably reduces the firm's goodwill, as the CNN article implies. Thus in the current media environment it's easier to justify the separate prices to the public and hence avoid hurting the firm's goodwill.