Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Wednesday, September 4, 2019

Consumer Use of Multiple Payment Methods

Oz Shy, Federal Reserve Bank of Atlanta explores Consumer Use of Multiple Payment Methods.

ABSTRACT: I investigate the degree to which buyers choose to diversify their use of payment methods for in-person purchases. Some buyers use only one payment instrument. All others combine the use of mostly cash, credit, and debit cards, and a few paper checks and prepaid cards. To each survey respondent, I apply the Herfindahl-Hirschman concentration index over the use of payment instruments. This index exhibits almost no correlation with any consumer demographics, payment volume or value. This motivates the theoretical model which explains the observed multiple and single use of payment methods based on heterogeneous consumer preferences.

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