Missing something very basic here and cannot pin point it.

We need to charge a client \$100 for a product. Let's say our payment processor charges us 10% on every transaction. We make this transparent to the client and charge them accordingly:

$\$x = \$100 / (1 - (10 / 100)) = $111.11111..$

Now, we want to offer to contribute to transaction fees such that they only have to pay half of what the payment processor charges. But clearly, $(\$100 + ((\$111.11111... - \$100) / 2))$ is not the answer.

The question is, how do we calculate the selling price such that the transaction fee is split half way between us and the client?

UPDATE: Based on the answers, here is the clarification that should have been part of the original question. $\$x=\$100$ is the pre-determined "selling price" to the client. We add whatever the payment processor charges us (10% in this case) and increase the selling price such that we receive $\$x=\$100$. Since we now want to "split" the processing fee with the client, we should lose from $\$100$ exactly how much extra the client is paying above $\$100$.

  • $\begingroup$ Erm, wait. Do they charge the customer 110 if you request (and obtain) 100? Or do you obtain 90 if you request 100 (and the customer is charged 100)? $\endgroup$ – Hagen von Eitzen Nov 8 '13 at 18:35
  • $\begingroup$ @HagenvonEitzen: We charge the customer \$111.111... such that the payment processor deducts 11.111... and we receive \$100. Now we are willing to charge \$x even if we receive less than \$100 as long as the processing fee is split equally. $\endgroup$ – Raheel Khan Nov 8 '13 at 18:53

As I understand it, you will charge the customer $p$ and receive $0.9p$. You want to pay half the processing fee, so $0.95p=100$, $p=\frac {100}{0.95}\approx 105.263$ You receive about $94.737$, so you are paying $5.263$ as are they.

  • $\begingroup$ Thank you. That is exactly what I was after but am not sure how to express it generically. The only known factors in the equation are $p=retail price$, $f=fee (10% in our case)$ and $sr=split ratio (50% is our contribution)$. Could you please elaborate $100/0.95$ as a generic expression having p, f & sr? $\endgroup$ – Raheel Khan Nov 8 '13 at 19:02
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    $\begingroup$ It is $\frac p{1-f\cdot sr}$ if you express $f$ and $sr$ as decimals instead of percents. $\endgroup$ – Ross Millikan Nov 8 '13 at 19:04
  • $\begingroup$ Thanks again. Now I understand why it was bugging me not to have simply multiplied (f & sr) in the standard (p / (1 - f)) equation. And sorry about about the mini-Markdown mistakes in my last comment. Cannot edit them. $\endgroup$ – Raheel Khan Nov 8 '13 at 19:16

I understand you want to calculate the price $a$ such that your contribution $100-a$ equals the customer's contribution $\left(1+\frac{10}{100}\right)a-100$. (At least this is the case if the payment service adds ten percent to your request and charges an accordingly higher amount from the customer; see below for th eothre way around). That is equivalent to $$\left(2+\frac{10}{100}\right)a=200$$ or $$a=\frac{2000}{21}= 95.\overline{238095} $$ (For $p$ % the answer would be $\frac{20000}{200+p} $)

If the payment service charges the original amount from the customer and subtracts ten percent from the amount and gives the rest to you, there is a slightly different siutuation: Your contribution is $100-\left(1-\frac{10}{100}\right)a$ and the customer's contribution is $a-100$. Again we equate, but this time obtain $$\left(2-\frac{10}{100}\right)a=200 $$ or $$a = \frac{2000}{19}=105.\overline{263157894736842105}$$ (For $p$ % the answer would be $\frac{20000}{200-p}$).

  • $\begingroup$ I think the customer contribution is $\frac {10}9a-100$ as then the seller is receiving $a$. If you charge the customer $\frac {11}{10}a$, the seller only gets $0.99a$, not $a$ $\endgroup$ – Ross Millikan Nov 8 '13 at 18:36

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