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Explaining adoption and use of payment instruments by U. S. consumers

  • Sergei Koulayev
  • Marc Rysman
  • Scott Schuh
  • Joanna Stavins

The way that consumers make payments is changing rapidly and attracts important current policy interest. This paper develops and estimates a structural model of adoption and use of payment instruments by U.S. consumers. We use a cross-section of data from the Survey of Consumer Payment Choice, a new survey of consumer behavior. We evaluate substitution and income effects. Our simulations shed light on the consumer response to the 2011 regulation of interchange fees on debit cards imposed by the Dodd-Frank Act, as well as the proposed settlement between Visa and MasterCard and the Department of Justice that would allow merchants to surcharge the use of payment cards.

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Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 12-14.

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Date of creation: 2012
Date of revision:
Handle: RePEc:fip:fedbwp:12-14
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  1. Arango, Carlos & Huynh, Kim P. & Sabetti, Leonard, 2011. "How do you pay? The role of incentives at the point-of-sale," Working Paper Series 1386, European Central Bank.
  2. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, March.
  3. Schuh, Scott & Stavins, Joanna, 2010. "Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1745-1758, August.
  4. Rochet, Jean-Charles & Tirole, Jean, 2005. "Two-Sided Markets : A Progress Report," IDEI Working Papers 275, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Ching, Andrew & Hayashi, Fumiko, 2008. "Payment Card Rewards Programs and Consumer Payment Choice," MPRA Paper 8458, University Library of Munich, Germany.
  6. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
  7. Stuart E. Weiner & Julian Wright, 2005. "Interchange fees in various countries: developments and determinants," Payments System Research Working Paper PSR WP 05-01, Federal Reserve Bank of Kansas City.
  8. Ron Borzekowski & Elizabeth K. Kiser, 2006. "The choice at the checkout: quantifying demand across payment instruments," Finance and Economics Discussion Series 2006-17, Board of Governors of the Federal Reserve System (U.S.).
  9. Marianne Verdier, 2011. "Interchange Fees In Payment Card Systems: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 25(2), pages 273-297, 04.
  10. Terri Bradford, 2008. "Developments in interchange fees in the United States and abroad," Payments System Research Briefing, Federal Reserve Bank of Kansas City, issue Apr.
  11. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  12. Gene Amromin & Sujit Chakravorti, 2009. "Whither Loose Change? The Diminishing Demand for Small-Denomination Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 315-335, 03.
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