Pay cash, buy less trash? – Evidence from German payment diary data

Martina Eschelbach

International Cash Conference 2017 – War on Cash: Is there a Future for Cash? from Deutsche Bundesbank

Abstract: This research note empirically investigates whether cash can prevent consumers from making needless purchases in unexpected shopping situations. Cash can have a disciplinary effect on short-term consumption because it imposes a strong temporary budget constraint and also reinforces the pain of paying. I use a sample of unexpected shopping situations that were recorded by participants of the Bundesbank’s study on payment behaviour. I find that the probability of a transaction subsequently being declared unnecessary is significantly lower when the consumer had paid the transaction in cash. The results are similar across different socioeconomic groups based on age, gender, education and income. I conclude that restricting the use of cash for transaction purposes can entail a reduction in consumer welfare.

Keywords: payment behaviour; consumer choice; overspending (search for similar items in EconPapers)
JEL-codes: D12 D14 D18 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-eur and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iccp17:162908

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