Why Do Shoppers Use Cash? Evidence from Shopping Diary Data

Wakamori, Naoki and Welte, Angelika (24. October 2013): Why Do Shoppers Use Cash? Evidence from Shopping Diary Data. SFB/TR 15 Discussion Paper No. 431

Abstract

Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative methods of payment such as debit and credit cards. For policy makers an important 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 unobserved heterogeneity (demandside factors) while controlling for merchants’ acceptance of cards (supply-side factors). Based on a policy simulation where we impose universal card acceptance among merchants, we find that overall cash usage would decrease by only 7.7 percentage points, implying that cash usage in small-value transactions is driven mainly by consumers’ preferences.

• Item Type: Paper
• Keywords: Money demand, Payment methods, Consumer financial behavior
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C9 - Stabilität, Wettbewerb und Liquidität in Finanzmärkten
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: G2, D1, C2
• Language: German