Convenient Prices, Cash Payments and Price Rigidity

23 Pages Posted: 5 Dec 2012 Last revised: 6 Apr 2014

See all articles by Yassine Bouhdaoui

Yassine Bouhdaoui

Vrije Universiteit Brussel

David Bounie

Telecom ParisTech

Abel Francois

Strasbourg University, LARGE; EM Strasbourg Business School; Telecom ParisTech

Date Written: March 28, 2014

Abstract

Recent works suggest that convenient prices that match monetary denominations exhibit above-average price rigidity and are set up by firms that have incentives to be paid in cash. The relationship between convenient prices and cash usage has however never been explicitly examined. This paper proposes a model that relates convenient prices to cash usage and exploits to test it a unique dataset in 2011 on cash payments and prices by a representative sample of French consumers. In line with the model, estimation results bring direct evidence that individuals’ shares of cash payments increase with convenient prices. This finding confirms that price rigidity can be in part explained by the use of cash to pay convenient prices.

Keywords: convenient prices, cash payments, price rigidity

JEL Classification: E31, E42, D11

Suggested Citation

Bouhdaoui, Yassine and Bounie, David and Francois, Abel, Convenient Prices, Cash Payments and Price Rigidity (March 28, 2014). Available at SSRN: https://ssrn.com/abstract=2184662 or http://dx.doi.org/10.2139/ssrn.2184662

Yassine Bouhdaoui

Vrije Universiteit Brussel ( email )

Boulevard de la Plaine 2
Ixelles, 1050
Belgium

David Bounie (Contact Author)

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Abel Francois

Strasbourg University, LARGE ( email )

47 avenue de la foret Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

EM Strasbourg Business School ( email )

PEGE
61 avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

Telecom ParisTech

46, rue Barrault
Paris Cedex 13, F-75634
France

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