I don't understand this paper. How does the merchant credit card fee change the price that users pay? I understand that they implicitly markup to make up for their loss, but everyone pays that markup, whether they pay with cash or card. This paper makes it seem like those who purchase with credit cards are paying slightly less than those who purchase with cash, and that's how it's being interpreted in the blogosphere: (links listed by closest-to-the-real-paper)

http://modeledbehavior.com/2010/07/27/are-credit-cards-regre...

http://motherjones.com/transition/inter.php?dest=http://moth...

http://kottke.org/10/08/cash-is-expensive

I understand how credit card users make some money due to the rewards programs, and that those reward programs are funded by the merchant fee and thus the markup that everyone (including those who pay with cash) pay. But the paper explicitly mentions the rewards programs, and seems to point to the merchant fee as an additional, separate factor. Anyone understand this?