Coordination on Use of Non-deferred Electronic Payment Instruments

Pidong Huang and Manjong Lee
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Pidong Huang: Korea University

Korean Economic Review, 2015, vol. 31, 5-24

Abstract: In the use of electronic payment technology, there is strategic complementarity and hence room for self-fulfilling multiple equilibria. But existing relevant literature is silent about how agents�� expectations become coordinated. This paper resolves the coordination problem in the use of a non-deferred electronic means of payment, which can be represented by a debit card. We focus on that because it is almost a perfect substitute for cash. The presence of exogenous shocks that have a fundamental impact on the cost of the technology makes agents coordinate their expectations in a particular way. We also show that a high inflation and a distortionary financing scheme for debit-card transactions cost disturb coordination in the use of debit cards.

Keywords: Cash; Coordination; Electronic Payment; Strategic Complementarities (search for similar items in EconPapers)
JEL-codes: E40 E60 (search for similar items in EconPapers)
Date: 2015
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