 Constrained or unconstrained price for debit card payment?Journal of Macroeconomics, 2014, vol. 41, issue C, 53-65 Abstract: Retailers in the Netherlands and the U.K. can charge different prices for a commodity depending on whether cash or a debit card is used as payment, whereas retailers in the U.S. generally cannot. These two types of economies with and without a uniform pricing constraint for cash and debit card payments are compared in a microfounded monetary model. We place particular emphasis on the distinctive features of cash and debit cards as payment methods: the cost of a cash transaction for the seller is typically lower than that of a debit card, whereas the cost of cash holdings for the buyer is higher than that of a debit card. Our results suggest that a uniform pricing constraint makes cash-holding costs decline but consumption dispersion between the poor and the rich increase. Numerical examples show that the beneficial effect of the constraint dominates its negative effect. Keywords: Cash; Debit card; Constrained price; Unconstrained price (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:41:y:2014:i:c:p:53-65 DOI: 10.1016/j.jmacro.2014.04.004 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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