Abstract

http://ssrn.com/abstract=1932620
 
 

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How Do You Pay? The Role of Incentives at the Point-of-Sale


Carlos A. Arango


affiliation not provided to SSRN

Kim P. Huynh


Government of Canada - Bank of Canada; Indiana University Bloomington - Department of Economics

Leonard Sabetti


Government of Canada - Bank of Canada

September 23, 2011

ECB Working Paper No. 1386

Abstract:     
This paper uses discrete-choice models to quantify the role of consumer socioeconomic characteristics, payment instrument attributes, and transaction features on the probability of using cash, debit card, or credit card at the point-of-sale. We use the Bank of Canada 2009 Method of Payment Survey, a two-part survey among adult Canadians containing a detailed questionnaire and a three-day shopping diary. We find that cash is still used intensively at low value transactions due to speed, merchant acceptance, and low costs. Debit and credit cards are used more frequently for higher transaction values where safety, record keeping, the ability to delay payment and credit card rewards gain prominence. We present estimates of the elasticity of using a credit card with respect to credit card rewards. Reward elasticities are a key element in understanding the impact of retail payment pricing regulation on consumer payment instrument usage and welfare.

Number of Pages in PDF File: 44

Keywords: Retail payments, credit card rewards, discrete-choice models

JEL Classification: E41, C35, C83

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Date posted: November 5, 2011  

Suggested Citation

Arango, Carlos A. and Huynh, Kim P. and Sabetti, Leonard, How Do You Pay? The Role of Incentives at the Point-of-Sale (September 23, 2011). ECB Working Paper No. 1386. Available at SSRN: http://ssrn.com/abstract=1932620

Contact Information

Carlos A. Arango (Contact Author)
affiliation not provided to SSRN ( email )
Kim P. Huynh
Government of Canada - Bank of Canada ( email )
234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada
Indiana University Bloomington - Department of Economics ( email )
Wylie Hall
Bloomington, IN 47405-6620
United States

Leonard Sabetti
Government of Canada - Bank of Canada ( email )
234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada
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