Chambers College of Business and Economics
Consumer wallets have more means of payment yet cash still is used most. We develop a dynamic structural model blending cash inventory management and payment instrument choice. For each expenditure, consumers endogenously pay with cash, debit card, or credit card with an option to withdraw cash beforehand. The model is estimated with transaction- level data from a daily consumer payment diary and reveals that utility from payment services exceed cash management costs. For payment card owners, optimal cash holdings are about $50 and jointly determined with the share of cash payments. Eliminating either cash or payment cards reduces consumer welfare significantly.
Digital Commons Citation
Briglevics, Tamás and Schuh, Scott, "This Is ``What's in Your Wallet'' ... and Here's How You Use It" (2020). Economics Faculty Working Papers Series. 45.