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Why Do Shoppers Use Cash? Evidence from Shopping Diary Data

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  • NAOKI WAKAMORI
  • ANGELIKA WELTE

Abstract

Recent studies find that cash remains the dominant payment choice for small‐value transactions despite the prevalence of alternative payment methods such as debit and credit cards. An important policy 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 heterogeneity, controlling for merchants' acceptance of cards. Based on a policy simulation imposing universal card acceptance among merchants, we find that overall cash usage would decrease by only 8.0 percentage points, implying that cash usage in small‐value transactions is driven mainly by consumer preferences.

Suggested Citation

  • Naoki Wakamori & Angelika Welte, 2017. "Why Do Shoppers Use Cash? Evidence from Shopping Diary Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(1), pages 115-169, February.
  • Handle: RePEc:wly:jmoncb:v:49:y:2017:i:1:p:115-169
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    File URL: http://hdl.handle.net/10.1111/jmcb.12379
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    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • D1 - Microeconomics - - Household Behavior
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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