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

2. 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,
Investigates payment instrument choice esp. impact of transaction size and extent and evolution of ‘single homing’

3. 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

4. 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)

5. 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

6. Comments and suggestions
Motivation
High quality but old data set ( ) can you better persuade me of relevance today?
e.g. mention overall shift in household instrument usage , politics of check withdrawal
Well executed, good combination analytical tools
Working paper 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