Search Results
Journal Article
Failing to Provide Public Goods: Why the Afghan Army Did Not Fight
The theory of public goods is mainly about the difficulty in paying for them. Our question here is this: Why might public goods not be provided, even if funding is available? We use the Afghan Army as our case study. We explore this issue using a simple model of a public good that can be provided through collective action and peer pressure, by modeling the self-organization of a group (the Afghan Army) as a mechanism design problem. We consider two kinds of transfer subsidies from an external entity such as the U.S. government. One is a Pigouvian subsidy that simply pays the salaries, ...
Working Paper
How People Pay Each Other: Data, Theory, and Calibrations
Using a representative sample of the U.S. adult population, we analyze which payment methods consumers use to pay other consumers (p2p) and how these choices depend on transaction and demographic characteristics. We additionally construct a random matching model of consumers with diverse preferences over the use of different payment methods for p2p payments. The random matching model is calibrated to the share of p2p payments made with cash, paper check, and electronic technologies observed from 2015 to 2019. We find about two thirds of consumers have a first p2p payment preference of cash. ...
Discussion Paper
Consumer Behavior in a Health Crisis: What Happened with Cash?
In the United States, COVID-19 cases and currency in circulation both surged in March 2020. Did consumer choice play a role in the increase in currency in circulation? With fewer opportunities to shop and pay in person, why would consumers hold more cash? Data from the fall 2019 Survey and Diary of Consumer Payment Choice and interim rapid-response surveys in spring and late summer 2020 give some insights into consumer cash holdings and payments behavior.
Working Paper
We Are All Behavioral, More or Less: Measuring and Using Consumer-Level Behavioral Sufficient Statistics
Can a behavioral sufficient statistic empirically capture cross-consumer variation in behavioral tendencies and help identify whether behavioral biases, taken together, are linked to material consumer welfare losses? Our answer is yes. We construct simple consumer-level behavioral sufficient statistics??B-counts??by eliciting seventeen potential sources of behavioral biases per person, in a nationally representative panel, in two separate rounds nearly three years apart. B-counts aggregate information on behavioral biases within-person. Nearly all consumers exhibit multiple biases, in ...
Working Paper
Cashless Stores and Cash Users
The emergence of cashless stores has led several cities and states to ban such stores. This article investigates this issue by characterizing consumers who pay cash for in-person purchases and consumers who do not have credit or debit cards. Using a random utility model, I estimate 1.3 to 30.9 percentage drop in average per-payment consumer surplus if all stores were to become cashless and when utility is measured by the cost of making a payment, security, and convenience. The conclusion provides a discussion of alternatives to cash for in-person purchases that may be needed before all ...
Working Paper
How Currency Denomination and the ATM Affect the Way We Pay
I show how currency denomination and the ATM influence consumers' choice of whether to pay cash for in-person purchases. I identify transaction values above which consumers switch from paying cash to paying with cards. The sharpest changes in the share of cash payments occur at $20 and $40, which coincide with the observation that most ATMs in the United States dispense multiples of $20 bills. Other thresholds prevail at multiples of $5 and $10. The above thresholds generate asymmetries in consumer behavior where the share of cash payments increases for payments values just below the ...
Report
How Consumers Get Cash: Evidence from a Diary Survey
Most research on payment instruments focuses on how consumers pay or spend their money using a wide variety of payment instruments including cash. This report focuses on the inverse of the question of spending, that is, how do consumers obtain cash? Data from the 2017 Diary of Consumer Payment Choice shows that, over a three-day period, about 21 percent of survey respondents get cash via various methods, such as getting cash from a family member or friend, using an ATM, getting cash back at retail, visiting a bank teller, etc. We find that consumers mostly get cash from family and friends, ...
Report
U.S. Consumers' Use of Personal Checks: Evidence from a Diary Survey
This paper presents a snapshot of U.S. consumers’ use of paper checks in 2017 and 2018, combining data from the 2017and 2018 Diaries of Consumer Payment Choice.Other data sources have tracked the decline in the use of paper checks since 2000. This report adds to that data by delving into the characteristics of 1,600 individual transactions—in particular, dollar amount, payee, and payer—made by a representative sample of U.S. consumers using checks. Among the findings:•Consumers used checks for 7 percent of transactions overall in 2017 and 2018 and wrote about three checks a ...
Report
How Merchants Get Paid
Using a representative sample of actual payments made by adult U.S. consumers, this article analyzes the composition of payment methods consumers use to pay for goods and services. Consumer spending is divided into 21 main merchant categories. Results show the distributions of electronic, card, and paper payment methods and the degree of payment concentration for each merchant category.
Working Paper
A Theory of Sticky Rents: Search and Bargaining with Incomplete Information
The housing rental market offers a unique laboratory for studying price stickiness. This paper is motivated by two facts: 1. Tenants? rents are remarkably sticky even though regular and expected recontracting would, by itself, suggest substantial rent flexibility. 2. Rent stickiness varies significantly across structure type; for example, detached unit rents are far stickier than large apartment unit rents. We offer the first theoretical explanation of rent stickiness that is consistent with these facts. In this theory, search and bargaining with incomplete information generates stickiness in ...