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Payment choice and currency use: Insights from two billion retail transactions

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  • Wang, Zhu
  • Wolman, Alexander L.

Abstract

Using three years of transactions data from a discount retailer with thousands of stores, we study payment variation along three dimensions: transaction size and location; weekly and monthly frequencies; and longer time horizons. In each case, we connect empirical patterns to theories of money demand and payments. We show that cross-sectional and time-series payment patterns are consistent with a theoretical framework in which individual consumers choose between cash and non-cash payments based on a threshold transaction size, and we evaluate factors that may account for the variation in threshold distributions across locations and time.

Suggested Citation

  • Wang, Zhu & Wolman, Alexander L., 2016. "Payment choice and currency use: Insights from two billion retail transactions," Journal of Monetary Economics, Elsevier, vol. 84(C), pages 94-115.
  • Handle: RePEc:eee:moneco:v:84:y:2016:i:c:p:94-115
    DOI: 10.1016/j.jmoneco.2016.10.005
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Wang, Zhu & Wolman, Alexander L., 2016. "Consumer Payment Choice in the Fifth District: Learning from a Retail Chain," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 51-78.
    2. Fernando Alvarez & Francesco Lippi, 2015. "Cash burns: An inventory model with a cash-credit choice," NBER Working Papers 21110, National Bureau of Economic Research, Inc.
    3. Jasmina Arifovic & John Duffy & Janet Hua Jiang, 2017. "Adoption of a New Payment Method: Theory and Experimental Evidence," Staff Working Papers 17-28, Bank of Canada.
    4. Jasmina Arifovic & John Duffy & Janet Jiang, 2017. "Adoption of a New Payment System: Theory and Experimental Evidence," Working Papers 171801, University of California-Irvine, Department of Economics.
    5. Heng Chen & Kim Huynh & Oz Shy, 2017. "Cash Versus Card: Payment Discontinuities and the Burden of Holding Coins," Staff Working Papers 17-47, Bank of Canada.
    6. repec:eee:moneco:v:90:y:2017:i:c:p:99-112 is not listed on IDEAS
    7. Schuh, Scott, 2017. "Measuring consumer expenditures with payment diaries," Working Papers 17-2, Federal Reserve Bank of Boston.

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    Keywords

    Payment choice; Money demand; Consumer behavior;

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