Payment Choice with Consumer Panel Data Cohen* Rysman** Wozniak*** Discussion by Alistair Milne, Loughborough University 15th PSS seminar, Helsinki, Aug 2017

Summary Utilises an unusual data set of scanned consumer grocery (food) purchases, by household member and including data on total transaction size and payment method (card v. check v. cash). 1.34 mn transactions in 16 designated market areas, 2006-2008 Investigates payment instrument choice esp. impact of transaction size and extent and evolution of ‘single homing’

Main findings Summary stats Average spend cash transactions $35.3, falling with size v. $70.2 for cheque and $64.9 for card, both increasing with size. Cash and card usage varies as expected with income, but not check usage Most h/holds utilise two instruments a few one Preferred instrument changes little month to month

Econometric issues Multinomial probit model Computational problems and potential bias with many individual fixed effects Solution: bias-correcting Dhane Jochmans (2015) and expectations maximizatiion estimator EM proposed by Chen Reverse causality, payment choice affecting transaction size Solution instrument with day of week variable as proposed by Terza et. Al. (2008)

Econometric results Transaction size strong predictor of payment choice, not much effected by control variables Demographics, lagged choice, or fixed effects or instrumentation Changing household preferences explain little of shift of choice toward card payment Mostly explained by increasing transaction size, entry of ‘card preferring’ households Analysis of check withdrawal Leading to fairly equal substitution into cash and card

Comments and suggestions Motivation High quality but old data set (2006-2008) can you better persuade me of relevance today? e.g. mention overall shift in household instrument usage 2000-2016, politics of check withdrawal Well executed, good combination analytical tools Working paper 2013. Updated econometrics since for potential bias? Much difference? One main question remains unanswered for me Do changes in household preferences affect transaction size and hence choice of instrument? Perhaps some accompanying modelling of transaction size This has implications for check withdrawal Different prediction today because of changed preferences