Network effects on Cash-Card Substitution in Transactions and Low Interest Rate Regimes
AbstractWe develop a Nash game on the adoption of a new EFTPOS (Electronic Fund Transfer at Point of Sale) card payment media given cash is dispensed by a competitive ATM (Automated Teller Machine) network. Equilibrium conditions when cash and card use coexist entail a specific relationship between the card network coverage parameter ("Ï"-super-"k") and the proportion ("Ï") of cash financed expenditures. We derive a payments innovation technology constrained transactions demand for money which is highly interest rate sensitive in low interest rate regimes. Data on cash-card use in the UK (1990-97) is used to calibrate the model. Copyright 2003 Royal Economic Society.
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Bibliographic InfoPaper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 507.
Date of creation: 2000
Date of revision:
Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
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- Sheri M. Markose & Yiing Jia Loke, 2003. "Network Effects On Cash-Card Substitution In Transactions And Low Interest Rate Regimes," Economic Journal, Royal Economic Society, vol. 113(487), pages 456-476, 04.
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