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

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  • Eschelbach, Martina
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.

Suggested Citation

  • Eschelbach, Martina, 2017. "Pay cash, buy less trash? – Evidence from German payment diary data," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162908, Deutsche Bundesbank.
    • Handle: RePEc:zbw:iccp17:162908
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    References listed on IDEAS

    as
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    Cited by:

    1. Yizhao Jiang, 2022. "The Influence of Payment Method: Do Consumers Pay More with Mobile Payment?," Papers 2210.14631, arXiv.org.

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    More about this item

    Keywords

    payment behaviour; consumer choice; overspending;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection

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