Currency and Debit cards as Means of Payment
Date Issued
2009
Date
2009
Author(s)
Yang, Jin-Ru
Abstract
We study the use of cash and debit cards as means of payment in a monetary search model. Cash is subject to the risk of theft, while debit cards may be less acceptable than cash in transactions. The informational friction is introduced to justify the differentials in the acceptability or, liquidity, of assets. Agents who do not recognize an asset do not accept it in a decentralized trade. In the benchmark model, the acceptability of debit cards is exogenously given, while it is endogenized as determined by agents’ decision to acquire information. Moreover, we consider two versions of the financial institution -- in the first version banks pay interests for deposits, while in the other banks charge an account maintenance fee.Consider the acceptability of debit cards is exogenously given, when banks pay interests for deposits or charge account maintenance fees, there exist multiple equilibria in cash and debit cards could be accepted as means of payment.When the acceptability of endogenously determined and the bank charge an account maintenance fee, there exist a unique equilibrium in cash and debit cards could be accepted as means of payment. In addition, more stores want to accept debit cards in this situation, because agents could less cost to become informed.
Subjects
monetary search model
Means of Payment
decentralized trade
pay interes
charge an account maintenance fee
Type
thesis
File(s)![Thumbnail Image]()
Loading...
Name
ntu-98-R95323046-1.pdf
Size
23.53 KB
Format
Adobe PDF
Checksum
(MD5):2b191bee22ae3c5565dfefebebfa60a3