Direct pricing of retail payment methods: Norway vs. US
In this paper we provide a general equilibrium model that helps explaining payment choice at the retail level: cash, electronic and paper-based instruments. In particular, it provides theoretical foundations to reconcile previous empirical evidence on this issue. The payment pattern of a given country can be shaped by the payment infrastructure, the cost of each payment instrument, the degree of technology development and the interest rate. We show that the introduction of a cheaper payment instrument, in this case electronic payments, may be welfare improving. The calibration exercise for Norway illustrates that the policy of correct pricing of checks promoted by the Norwegian authorities may imply 4% increase in the welfare of the country.
|Date of creation:||May 2010|
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