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Why Do Shoppers Use Cash? Evidence from Shopping Diary Data

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  • Wakamori, Naoki
  • Welte, Angelika

Abstract

Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative methods of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage. Using unique shopping diary data, we estimate a payment choice model with individual unobserved heterogeneity (demandside factors) while controlling for merchants’ acceptance of cards (supply-side factors). Based on a policy simulation where we impose universal card acceptance among merchants, we find that overall cash usage would decrease by only 7.7 percentage points, implying that cash usage in small-value transactions is driven mainly by consumers’ preferences.

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Bibliographic Info

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 431.

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Date of creation: 24 Oct 2013
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Handle: RePEc:trf:wpaper:431

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Keywords: Money demand; Payment methods; Consumer financial behavior;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. People do not want a cashless society
    by Economic Logician in Economic Logic on 2012-08-30 15:03:00
  2. [??]????????????????????
    by himaginary in himaginaryの日記 on 2012-09-20 07:00:00
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Cited by:
  1. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh & Helmut Stix, 2014. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 192, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Eschelbach, Martina & Schmidt, Tobias, 2013. "Precautionary motives in short-term cash management: Evidence from German POS transactions," Discussion Papers 38/2013, Deutsche Bundesbank, Research Centre.
  3. Michael Cohen & Marc Rysman, 2013. "Payment choice with consumer panel data," Working Papers, Federal Reserve Bank of Boston 13-6, Federal Reserve Bank of Boston.

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