Something I've always been confused about, maybe you know the answer -
Don't merchant's already charge the amount that causes (number of units sold) * (profit per unit) to be as high as possible? If visa suddenly dropped the transaction fee to 1%, I don't think stores would pass the 2% savings on to the customer
If free markets existed, that is how they would operate. Sellers would be small, independent, have perfect knowledge of the market and would always seek to maximise profit.
But free markets don't exist. There are many reasons why merchants might not always aim to maximise profit. They might instead seek the security of a loyal customer base, for example. In many markets, sellers ruthlessly compete on price, often at the cost of short term profit. Supermarkets in the UK is a good example. If transaction costs for supermarkets were reduced that would absolutely be seen by the customers.
Don't merchant's already charge the amount that causes (number of units sold) * (profit per unit) to be as high as possible? If visa suddenly dropped the transaction fee to 1%, I don't think stores would pass the 2% savings on to the customer