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An Evaluation of the Social Costs of Payment Methods Literature

21 Pages Posted: 14 Jan 2012  

Allan Shampine

Compass Lexecon

Date Written: January 12, 2012

Abstract

The last few decades have produced many inconsistent estimates of the social costs of payment methods. This paper demonstrates that there is significant disagreement in the theoretical underpinnings of the studies, and that the methodologies used are not robust. Together, these factors make it difficult to draw conclusions about the relative costs and benefits of different payment methods, as different studies are likely to be comparing different elements, and their sensitivity makes it difficult to show that estimates are statistically different from one another. The repeated presentation of estimates without disclosure of the broad confidence intervals associated with those estimates is an ongoing problem for the literature and for policy makers who have relied upon those estimates. Future research should focus on the development of standards for estimation to facilitate comparisons across time and countries, and should fully discuss the sensitivity of new estimates.

Keywords: payment method, network, payment card, social cost

JEL Classification: D6, E4, E5

Suggested Citation

Shampine, Allan, An Evaluation of the Social Costs of Payment Methods Literature (January 12, 2012). Available at SSRN: https://ssrn.com/abstract=1984248 or http://dx.doi.org/10.2139/ssrn.1984248

Allan Shampine (Contact Author)

Compass Lexecon ( email )

United States

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