Convenient Prices, Cash Payments and Price Rigidity
23 Pages Posted: 5 Dec 2012 Last revised: 6 Apr 2014
Date Written: March 28, 2014
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: Suggested Citation