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Payment choice with consumer panel data

Listed author(s):
  • Michael Cohen
  • Marc Rysman

We exploit scanner data to track payment choice for grocery purchases for a large panel of households over three years. We show that households focus most of their expenditures on one or at most two of these instruments in choosing between using cash, a check, or a card, and they very rarely switch. We focus particularly on the role of expenditure size in determining payment choice. While the use of a long panel for these purposes is novel, the introduction of controls for household heterogeneity has little effect on our estimates. Thus, we find that transaction size is an important determinant of payment choice, not only across households but within households.

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Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 13-6.

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Date of creation: 2013
Handle: RePEc:fip:fedbwp:13-6
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  1. Fusaro, Marc Anthony & Dutkowsky, Donald H., 2011. "What explains consumption in the very short-run? Evidence from checking account data," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 542-552.
  2. Klee, Elizabeth, 2008. "How people pay: Evidence from grocery store data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 526-541, April.
  3. Naoki Wakamori & Angelika Welte, 2012. "Why Do Shoppers Use Cash? Evidence from Shopping Diary Data," Staff Working Papers 12-24, Bank of Canada.
  4. Sergei Koulayev & Marc Rysman & Scott Schuh & Joanna Stavins, 2016. "Explaining adoption and use of payment instruments by US consumers," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 293-325, 05.
  5. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
  6. Nicole Jonker & Anneke Kosse, 2009. "The impact of survey design on research outcomes: A case study of seven pilots measuring cash usage in the Netherlands," DNB Working Papers 221, Netherlands Central Bank, Research Department.
  7. Jean‐Charles Rochet & Jean Tirole, 2006. "Two‐sided markets: a progress report," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 645-667, 09.
  8. Marc Anthony Fusaro & Donald H. Dutkowsky, 2013. "What explains consumption and money holding in the very short-run?: evidence from checking account data," Applied Economics Letters, Taylor & Francis Journals, vol. 20(13), pages 1228-1232, September.
  9. Carlos Arango & Kim Huynh & Leonard Sabetti, 2011. "How Do You Pay? The Role of Incentives at the Point-of-Sale," Staff Working Papers 11-23, Bank of Canada.
  10. Ching, Andrew T. & Hayashi, Fumiko, 2010. "Payment card rewards programs and consumer payment choice," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1773-1787, August.
  11. 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.
  12. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  13. White, Kenneth J, 1975. " Consumer Choice and Use of Bank Credit Cards: A Model and Cross-Section Results," Journal of Consumer Research, Oxford University Press, vol. 2(1), pages 10-18, June.
  14. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 2-16, January.
  15. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
  16. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 27-28, January.
  17. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  18. Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-143, Summer.
  19. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
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