Workshop Registration and Breakfast

Audiovisual Lounge

Workshop Introduction

Jeffrey Fuhrer

Executive Vice President and Director of Research

Federal Reserve Bank of Boston

Credit Card Competition and Naïve Hyperbolic Consumers by Elif Incekara

This paper shows that consumers may be unresponsive to interest-rate and credit limits in credit card offers because of a combination of the consumer's timing inconsistency, credit card companies’ grace period offer, and one period lag in using a new card. The author demonstrates that there are circumstances in which zero and positive expected profits would be possible.

Elif Incekara

Presenter / PhD Candidate

Pennsylvania State University

Presentation

Jeremy Tobacman

Discussant / PhD Candidate

Harvard University

Break

Audiovisual Lounge

Price Discrimination with Experience Goods: Sorting-Induced Biases and Illusive Surplus by Ronald Goettler and Karen Clay

Firms often offer menus of two-part tariffs to price discriminate among consumers with heterogeneous preferences. This paper studies the effectiveness of this screening mechanism when consumers are uncertain about the quality of the good and resolve this uncertainty through consumption experiences. The analysis highlights four elements that influence consumer behavior and affect pricing strategies: beliefs, switching costs, experiential learning, and mistakes on tariff choice.

Ronald Goettler

Presenter / Associate Professor of Economics

Carnegie Mellon University

Presentation

Dirk Bergemann

Discussant / Professor of Economics

Yale University

Lunch

New England Room

Determinants of Borrowing Limits on Credit Cards by Shubhasis Dey and Gene Mumy

The fact that the actual amounts borrowed on credit cards may differ from their approved borrowing limits generates a new source of information asymmetry between borrowers and lenders in this market. The paper proposes a contracting scheme that will help reduce this misallocation problem. Moreover, it explains how new information on borrowing patterns will generate revisions of existing contracts and counteroffers (such as balance transfer offers) from competing banks.

Shubhasis Dey

Presenter / Senior Analyst

Bank of Canada

Presentation

Paul Willen

Discussant / Senior Economist

Federal Reserve Bank of Boston

Presentation

Piecing Together a Portfolio Puzzle: Accounting for Why Households Borrow High and Lend Low by Jonathan Zinman by Shubhasis Dey and Gene Mumy

Many consumers seem to be simultaneously borrowing high and lending low (BHLL). In particular, the mean U.S. household with a credit card fails to use highly liquid assets to pay down credit card debt. The paper examines how BHLL is defined and measured. The author further suggests that most BHLL is a mirage created by measuring “arbitrage” opportunities with respect to pecuniary asset yields rather than the true value of liquidity

Jonathan Zinman

Presenter / Assistant Professor

Department of Economics

Dartmouth College

Presentation

Annamaria Lusardi

Discussant / Associate Professor

Department of Economics

Dartmouth College

Presentation

Break

Audiovisual Lounge

Multihoming in the Market for Payment Media: Evidence from Young Finnish Consumers by Ari Hyytinen and Tuomas Takalo

In the market for payment media, some consumers use only one medium when paying for their point-of-sale transaction , while others multihome and use many. In this paper the authors look at determinants of the adoption of new payment media through the window of multihoming. Using data on young Finnish consumers, the results suggest that increasing consumer awareness could significantly speed up the adoption of new means of payment.

Tuomas Takalo

Presenter / Research Supervisor

Bank of Finland

Presentation

Oz Shy

Discussant / Professor

WZB Research – Social Science Research Center, Berlin and University of Haifa, Israel

Dartmouth College

Presentation

Welcome Reception

Economic Adventure

Conference Registration and Breakfast

Audiovisual Lounge

Welcome

Jeffrey Fuhrer

Executive Vice President and Director of Research

Federal Reserve Bank of Boston

Consumers' Use of Debit Cards: Patterns, Preferences and Price Response by Ron Borzekowski, Elizabeth Kiser, and Shaista Ahmed

Dramatic changes have occurred in the U.S. payment system over the past two decades, most notably an explosion in electronic card-based payments. Using a new nationally representative consumer survey, the paper describes the current use of debit cards by U.S. consumers, including how demographics affect use, reasons for using debit cards, and substitutes between debit and other payment instruments. The authors also examine the relationship between household financial conditions and payment choice, and they analyze the price sensitivity of card use.

Elizabeth Kiser

Presenter / Economist

Board of Governors of the Federal Reserve System

Presentation

Genie Driskill

Discussant / COO and Senior Vice President – Research

Synergistics Research Corporation

Presentation

Robert Hunt

Senior Economist

Synergistics Research Corporation

Presentation

Visa Payment Panel Study by Visa USA Research Services

Consumers make billions of payment decisions every year. They have many additional choices today that were not available 50 years ago. The paper provides an overview of Visa's Payment Panel Study, including a history of the Panel and a brief review of the methodology, sampling structure, and data gathering process. The results of this effort to better understand consumer spending behavior show how payment method preferences have changed over time.

Tracy Hampton

Presenter / Senior Vice President, Research Services

Visa USA

Ariana-Michele Moore

Discussant / Senior Analyst

Celent

Presentation

Jonathan Zinman

Assistant Professor

Department of Economics

Dartmouth College

Presentation

Break

Audiovisual Lounge

U.S. Consumer Payments Data: What Information Exists and What Is Needed?

The purpose of this two-part presentation is to take stock of existing consumer payments data, voice the need for additional data, and evaluate the pros and cons, and costs and benefits, of efforts to collect and disseminate a broader range of national, publicly available data on consumer payments. The session will be divided into two panels, Panel A and Panel B. The goal will be to initiate a dialogue about the need to develop a framework and roadmap for a national agenda to collect more and better consumer payments data.

Panel A: What Consumer Payment Data Exist?

This session will focus on what data exist. It will include participants from the banking industry, non-bank payments industry, and Federal Reserve who will describe their data, why they collect it, and how they use it.

Lucia Dunn

Moderator / Professor of Economics

Ohio State University

Presentation

Panelists:

Robert Avery

Senior Economist

Board of Governors of the Federal Reserve System

Ashley Lyons

Manager of Market Intelligence and Alliance

United State Postal Service

Presentation

Deborah Patrick

Group Account Director

TNS – Financial Service Group

David Stewart

Senior Vice President – Research

Global Concepts

Lisa Tidwell

Director of Market Intelligence, First Data Debit Services

First Data Corporation

Presentation

Margaret Morgan Weichert

Senior Vice President, Payments Strategy

Bank of America

Jane Yao

Managing Director, Benchmarking and Survey Research

American Bankers Association

Presentation

General Discussion

Lunch

Harborview Dining Room

Panel B: What Consumer Payment Data Are Needed?

This session will focus on what data are needed. It will include participants from the academic world, consumer advocacy groups, and public policy makers who will explain why the existing data are not sufficient for their needs and what additional data they would like to have made available from existing sources or collected in new efforts.

Scott Schuh

Moderator / Senior Economist and Policy Advisor

Federal Reserve Bank of Boston

Presentation

Panelists:

Patricia Allouise

Assistant Vice President and Assistant General Counsel

Federal Reserve Bank of Boston

Presentation

Sharon Hermanson

Senior Policy Advisor

Public Policy Institute – AARP

Presentation

Ronda Kent

Senior Attorney

Financial Management Service

U.S. Department of the Treasury

Presentation

Jeffrey Marquardt

Deputy Director

Division of Reserve Bank Operations and Payment Systems

Board of Governors of the Federal Reserve System

Martha Starr

Professor of Economics

American University

General Discussion

Break

Audiovisual Lounge

Cash, Check or Bank Card? The Effects of Transaction Characteristics on the Use of Payment Instruments by David Bounie and Abel Francois

This session will summarize the results of a 2005 survey of French consumer payment practices using a unique and original dataset. The survey focused on payment methods at the point of sale: cash, check, or bank card. The paper relates transaction size, type of good and spending place, and a double supply-side effect to assess the role of transaction characteristics in the use of payment instruments.

David Bounie

Presenter / Assistant Professor in Economics

Telecom Paris

Presentation

Discussants:

Elizabeth Klee

Economist

Board of Governors of the Federal Reserve System

Presentation

Aaron McPherson

Research Director, Payments

Financial Insights/IDC

Interactive Survey

Reception

Roof Garden Terrace

Breakfast

Ausiovisual Lounge

Consumer Payment Choice by Janusz Ordover and Margaret Guerin-Calvert

This session will examine changes in consumers’ choice of payment instruments in the United States, with a particular focus on the expansion of electronic payments into new channels. The authors assess the interrelationship among consumers’ choice of payment mechanism, interchange fees, and effects on retail pricing by putting them into the appropriate two- sided network context. Policy implications of the findings for assessment of both regulatory and enforcement policy are also addressed.

Margaret Guerin-Calvert

Presenter / President and Managing Director

Competition Policy Associates, Inc.

Discussants:

Sujit "Bob" Chakravorti

Senior Economist

Federal Reserve Bank of Chicago

Presentation

Steve Mott

Chief Executive Officer

BetterBuyDesign

Loyalty and Consumer Choice Panel

Economists view reward programs for credit and debit users as a price discount afforded the users. To the payments industry, reward programs are a key to building and retaining loyal consumers. This panel seeks to understand how consumers respond to payment method incentives and whether rewards and loyalty are optimal for society. Do “rewards” ultimately tax the merchant and in turn the user with higher prices? Alternatively, could merchants and consumers benefit from an expansion of the current loyalty programs so that marketing could be targeted more directly to consumers?

Tony Hayes

Moderator / Vice President, Strategy and Organization Effectiveness

Dove Consulting

Panelists:

Tim Attinger

Senior Vice President, Product Innovation and Development

Visa USA

Fumiko Hayashi

Senior Economist

Federal Reserve Bank of Kansas City

Payment Card Rewards Programs and Consumer Payment Choice

Presentation

William Koleszar

Senior Vice President, New Product Development and Emerging Opportunities

Citizens Financial Group

Jonathan Silver

President and CEO

Affinity Solutions

General Discussion

Break

Audiovisual Lounge

Payment Instruments as Perceived by Consumers – A Public Surveyby Nicole Jonker

Survey results show that Dutch consumers perceive paying in cash as an inexpensive way to pay, while they regard electronic payment cards as relatively expensive. The survey also highlights several non-price features that contribute to the unpopularity of electronic payment cards in the Netherlands.

Nicole Jonker

Presenter / Economist

De Nederlandsche Bank

Presentation

Discussants:

Jeffrey Dominitz

Senior Economist

RAND Corporation

and

Associate Professor

Heinz School of Public Policy and Management

Carnegie Mellon University

Presentation

Jed Kolko

Research Fellow

Public Policy Institute of California

Presentation

Lunch

New England Room

Cash to Electronic Payments Panel

Is moving away from cash to electronic payments for small-value items in the best interest of, and more efficient for, consumers and society? Many retailers, especially those selling low-value products, see their competitors offer credit and debit at the point of sale and feel pressure to offer electronic options. What are the true costs of cash versus the benefits of cash for low payments? Is the movement toward low-value electronic payments best for consumers and merchants? Is it optimal to have minimal cash usage in businesses?

Moderator / Michael Kasavana

NAMA Professor of Hospitality Business

Michigan State University

Presentation

Panelists:

Mark Friedman

President and CEO

Peppercoin

Gregory Garback

Executive Officer, Department of Finance

Washington Metropolitan Area Transport Authority

Tim Hammonds

President and CEO

Food Marketing Institute

Anne Layne-Farrar

Principal

LECG, LLC (Law and Economics Consulting Group)

General Discussion

Debit vs. Credit: A Study of Self-Control in Shopping Behavior, Theory and Evidence by Marc Fusaro

Debit cards are the fastest growing consumer payment method despite being more expensive and less convenient than credit cards. This session presents a search theoretic model that explains how some consumers use debit cards to avoid overspending. A data set of checking account records is used to show some evidence for the theory.

Marc Fusaro

Presenter / Assistant Professor

Department of Economics

East Carolina University

Presentation

Discussants:

Bruce Cundiff

Research Analyst

Javelin Strategy and Research

Stephan Meier

Economist

Federal Reserve Bank of Boston

Presentation

Survey Results and Closing Remarks

Scott Schuh

Senior Economist and Policy Advisor

Federal Reserve Bank of Boston

Adjournment