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Further Thoughts on the Cashless Society: A Reply to Dr. Shampine

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Author Info
Daniel Garcia-Swartz (LECG Consulting)
Robert W. Hahn (AEI-Brookings Joint Center on Regulatory Studies)
Anne Layne-Farrar ()

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Abstract

We address Allan Shampine's critiques of our study on the costs and benefits of payment instruments, and review the current state of the literature. We argue that a consensus seems to be emerging in which: (a) different payment instruments appear to be socially efficient at different transaction sizes; (b) cash appears to be efficient for small payments; and (c) debit cards appear to overtake cash as the socially optimal instrument as the transaction size increases. Except for the fact that in our study credit appears to overtake debit at large transaction sizes, our 2006 findings are consistent with the consensus.

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Publisher Info
Article provided by Concept Economics in its journal Review of Network Economics.

Volume (Year): 6 (2007)
Issue (Month): 4 (December)
Pages: 509-524
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Handle: RePEc:rne:rneart:v:6:y:2007:i:4:p:509-524

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Related research
Keywords: credit card; cash; cost benefit; welfare;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Daniel D. Garcia-Swartz & Robert W. Hahn & Anne Layne-Farrar, 2006. "The Move Toward a Cashless Society: A Closer Look at Payment Instrument Economics," Review of Network Economics, Concept Economics, vol. 5(2), pages 175-198, June. [Downloadable!]
  2. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Discussion Papers 96-01, University of Copenhagen. Department of Economics.
    Other versions:
  3. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-34, May.
    Other versions:
  4. Jonathan Zinman, 2005. "Debit or credit?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston. [Downloadable!]
  5. Carol C. Bertaut & Michael Haliassos, 2006. "Credit Cards: Facts and Theories," CFS Working Paper Series 2006/19, Center for Financial Studies. [Downloadable!]
  6. ROCHET, Jean-Charles & TIROLE, Jean, 2008. "Must-Take Cards: Merchant Discounts and Avoided Costs," IDEI Working Papers 496, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  7. David Humphrey & Magnus Willesson & Ted Lindblomand & Goran Bergendahl, 2003. "What does it Cost to Make a Payment?," Review of Network Economics, Concept Economics, vol. 2(2), pages 159-174, June. [Downloadable!]
  8. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  9. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  10. ten Raa, Thijs & Shestalova, Victoria, 2004. "Empirical evidence on payment media costs and switch points," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 203-213, January. [Downloadable!] (restricted)
  11. Jonathan A. Parker, 1999. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER Working Papers 7238, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. Margaret E. Guerin-Calvert & Janusz A. Ordover, 2005. "Merchant Benefits and Public Policy towards Interchange: An Economic Assessment," Review of Network Economics, Concept Economics, vol. 4(4), pages 384-414, December. [Downloadable!]
  13. Laibson, David, 1998. "Life-cycle consumption and hyperbolic discount functions," European Economic Review, Elsevier, vol. 42(3-5), pages 861-871, May. [Downloadable!] (restricted)
  14. Daniel D. Garcia-Swartz & Robert W. Hahn & Anne Layne-Farrar, 2006. "The Move Toward a Cashless Society: Calculating the Costs and Benefits," Review of Network Economics, Concept Economics, vol. 5(2), pages 199-228, June. [Downloadable!]
  15. Jean-Charles Rochet & Jean Tirole, 2007. "Must-Take Cards and the Tourist Test," DNB Working Papers 127, Netherlands Central Bank, Research Department. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Takala , Kari & Viren, Matti, 2008. "Efficiency and costs of payments: some new evidence from Finland," Research Discussion Papers 11/2008, Bank of Finland. [Downloadable!]
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