Convenient prices,cash payments and price rigidity |
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| Affiliation: | 1. APEC — C2.33, Vrije Universiteit Brussel, Pleinlaan 2, B-1050 Brussels, Belgium;2. Telecom ParisTech, Economics and Social Sciences, 46 rue Barrault, 75634 Paris Cedex 13, France;3. EM Strasbourg Business School-Strasbourg University (LaRGE), and Telecom ParisTech, 46 rue Barrault, 75634 Paris Cedex 13, France;1. Department of Finance, School of Economics and Management, Changzhou University, Changzhou 213164, PR China;2. School of Business Administration, Zhejiang Gongshang University, Hangzhou 310018, PR China;3. Department of Accounting and Finance, School of Management, Zhejiang University, Hangzhou 310058, PR China;1. Warren Centre for Actuarial Studies and Research, University of Manitoba, Winnipeg, MB, Canada;2. Department of Statistics and Actuarial Science, University of Waterloo, Waterloo, ON, Canada;1. University of Chicago, United States of America;2. NBER, United States of America;3. IIES, Sweden;4. CEPR, United Kingdom;5. IZA, Germany;6. Princeton University, United States of America;7. IFS, United Kingdom of Great Britain and Northern Ireland |
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| Abstract: | Recent works suggest that convenient prices that match monetary denominations exhibit above-average price rigidity and are set up by firms that have incentives to be paid in cash. The relationship between convenient prices and cash usage has however never been explicitly examined. This paper proposes a model that relates convenient prices to cash usage and exploits to test it a unique dataset in 2011 on cash payments and prices by a representative sample of French consumers. In line with the model, estimation results bring direct evidence that individuals' shares of cash payments increase with convenient prices. This finding confirms that price rigidity can be in part explained by the use of cash to pay convenient prices. |
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