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Author:Schuh, Scott 

Discussion Paper
The Boston Fed study of consumer behavior and payment choice: a survey of Federal Reserve System employees
The way people pay for goods and services is changing dramatically, but little data and research on consumer behavior and payment choice are publicly available. This paper describes the results of a survey of payment behavior and attitudes taken by Federal Reserve employees in 2004. Major contributions of the survey are that it asks: 1) why payment choices are made; 2) why individual payment behavior has changed; and 3) why individual-specific payment characteristics matter for payment choice. Although the survey is not statistically representative of U.S. consumers, and thus may not provide accurate estimates of aggregate U.S. payment trends, many results are consistent with data from more representative payment surveys. For example, the data show a trend away from check-writing and toward electronic and emerging payment methods, but the choice of payment method depends on the type of payment, amount of payment, and other complex factors. Also, cost, convenience, and control over timing are the most important characteristics determining respondents' adoption and use of payment methods. We find that payment characteristics vary widely across respondents, partly because of inherent heterogeneity but perhaps also because of measurement error, misperception, or inadequate information (lack of consumer education). Cross-sectional evidence shows that respondents tend to use payment methods in a manner broadly consistent with their reported assessments of the payment characteristics.
AUTHORS: Crowe, Marianne; Blair, Krista; Schuh, Scott; Benton, Marques
DATE: 2007

Discussion Paper
Consumer behavior and payment choice : 2006 conference summary
This paper summarizes the proceedings of the second Consumer Behavior and Payment Choice conference, held at the Federal Reserve Bank of Boston on July 25?27, 2006. These conferences are unique in featuring the collaboration of two groups of payments experts ? the private-sector payments industry on the one hand, and the academic, research, and policymaking communities on the other ? to stimulate more research and understanding of consumer payment behavior. The central focus of this second conference was learning more about the numerous consumer payments data sources that are available ? but which are not well known or easily accessed, often for proprietary reasons ? and discovering what further information is needed. Panel sessions on payment card loyalty programs and the transition from cash to electronic payments were informative and stimulated much debate. Research paper presentations provided additional support for the collection and analysis of innovative new data sources to enhance our understanding of the decisions consumers make when choosing payment methods.
AUTHORS: Carten, Margaret; Stavins, Joanna; Schuh, Scott; Littman, Daniel A.
DATE: 2007

Discussion Paper
Consumer behavior and payment choice: a conference summary
The Emerging Payments Research Group (EPRG) at the Federal Reserve Bank of Boston sponsored a new conference, ?Consumer Behavior and Payment Choice: How and Why Do Consumers Choose Their Payment Methods?? on October 27?28, 2005, at the Boston Fed. The conference brought together a diverse set of participants from the academic, private, and public sectors. This paper provides a summary and overview of the conference. Key conclusions are that the consumer?s decision-making process concerning payment choice is quite complex, that standard economic models have difficulty incorporating this complexity, that additional research?especially interdisciplinary research?into consumer choice of payment method is needed, and that this conference was an important step in that direction.
AUTHORS: Schuh, Scott; Crowe, Marianne; Stavins, Joanna
DATE: 2006

Discussion Paper
The 2008 Survey of Consumer Payment Choice
This paper presents the 2008 version of the Survey of Consumer Payment Choice (SCPC), a nationally representative survey developed by the Consumer Payments Research Center of the Federal Reserve Bank of Boston and implemented by the RAND Corporation with its American Life Panel. The survey fills a gap in knowledge about the role of consumers in the transformation of payments from paper to electronic by providing a broad-based assessment of U.S. consumers' adoption and use of nine payment instruments, including cash. The average consumer has 5.1 of the nine instruments, and uses 4.2 in a typical month. Consumers make 53 percent of their monthly payments with a payment card (credit, debit, and prepaid). More consumers now have debit cards than credit cards, and consumers use debit cards more often than cash, credit cards, or checks individually. Cash, checks, and other paper instruments are still popular and account for 37 percent of consumer payments. Most consumers have used newer electronic payments, such as online banking bill payment, but they only account for 10 percent of consumer payments. Security and ease of use are the characteristics of payment instruments that consumers rate as the most important.
AUTHORS: Meijer, Erik; Foster, Kevin; Zabek, Michael A.; Schuh, Scott
DATE: 2010

Discussion Paper
Summary of the workshop on Consumer Behavior and Payment Choice
This paper summarizes and outlines some interesting issues that arose during a recent workshop on Consumer Behavior and Payment Choice, hosted by the Federal Reserve Bank of Boston?s Emerging Payments Research Group (EPRG) on July 25, 2008. Topics addressed are the consumer adoption of new payment technologies, credit card debt management, payment card surcharges, and involuntary bank account closures.
AUTHORS: Schuh, Scott; Stavins, Joanna
DATE: 2008

Discussion Paper
An economic analysis of the 2010 proposed settlement between the Department of Justice and credit card networks
In 2010, the Department of Justice (DOJ) filed a lawsuit against the credit card networks American Express, MasterCard, and Visa for alleged antitrust violations. We evaluate the extent to which the recently proposed settlement between the DOJ and Visa and MasterCard (henceforth, "Proposed Settlement") is likely to achieve its central objective: "?to allow Merchants to attempt to influence the General Purpose [Credit] Card or Form of Payment Customers select by providing choices and information in a competitive market." In word and spirit, the Proposed Settlement represents a significant step toward promoting competition in the credit card market. However, we find that merchants are unlikely to be able to take full advantage of the Proposed Settlement's new freedoms because they currently lack comprehensible and complete information on the full and exact merchant discount fees for their customers' credit cards. We analyze the likely consequences of this information problem, and consider ways in which it could be remedied. We also evaluate the probable welfare consequences of allowing merchants to impose surcharges to reflect the fees associated with the use of payment cards.
AUTHORS: Schuh, Scott; Triest, Robert K.; Stavins, Joanna; Shy, Oz
DATE: 2011

Discussion Paper
The 2009 survey of consumer payment choice
This paper presents results of the 2009 Survey of Consumer Payment Choice (SCPC), along with revised 2008 SCPC data. In 2009, the average U.S. consumer held 5.0 of the nine payment instruments available, including cash, and used 3.8 of them during a typical month. Between the 2008 and 2009 surveys, a period that includes the trough of the latest recession, consumers significantly increased their use of cash and close substitutes for cash, such as money orders and prepaid cards. At the same time, consumers reduced their use of credit cards and (to a lesser extent) debit cards, as well as payments made using a bank account number. Weaker economic conditions, new government regulations, and bank pricing of payment card services all likely contributed to the shift back toward cash. However, it is difficult to determine how much each of these factors contributed, and whether the shift is transitory or permanent, without more data and research on consumer payment choice. In 2009, one in three consumers had a prepaid card and nearly as many had a nonbank payment account online, while 3 percent made a mobile payment. By focusing on payments by consumers only, the SCPC complements the recent 2010 Federal Reserve Payment Study, which describes the entire noncash payments economy.
AUTHORS: Foster, Kevin; Meijer, Erik; Schuh, Scott; Zabek, Michael A.
DATE: 2011

Discussion Paper
Who gains and who loses from credit card payments?: theory and calibrations
Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or ?cash?) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year. Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general. On average, and after accounting for rewards paid to households by banks, the lowest-income household ($20,000 or less annually) pays $23 and the highest-income household ($150,000 or more annually) receives $756 every year. We build and calibrate a model of consumer payment choice to compute the effects of merchant fees and card rewards on consumer welfare. Reducing merchant fees and card rewards would likely increase consumer welfare.
AUTHORS: Shy, Oz; Schuh, Scott; Stavins, Joanna
DATE: 2010

Working Paper
Gross job flows and firms
This paper extends the work of Dunne, Roberts, and Samuelson [3] and Davis, Haltiwanger, and Schuh [2] on gross job flows among manufacturing plants. Gross job creation, destruction, and reallocation have been shown to be important in understanding the birth, growth, and death of plants, and the relation of plant life cycles to the business cycle. However, little is known about job flows between firms or how job flows among plants occur within firms (corporate restructuring). We use information on company organization from the Longitudinal Research Database (LRD) to investigate the relationship between plant-level and firm-level job flows. We document: (1) the fraction of plant-level gross flows occurring between firms; and (2) gross job flows by the extent of excess job reallocation occurring in firms.
AUTHORS: Schuh, Scott; Triest, Robert K.
DATE: 1999

Working Paper
Input and output inventories in general equilibrium
We build and estimate a two-sector (goods and services) dynamic stochastic general equilibrium model with two types of inventories: materials (input) inventories facilitate the production of finished goods, while finished goods (output) inventories yield utility services. The model is estimated using Bayesian methods. The estimated model replicates the volatility and cyclicality of inventory investment and inventory-to-target ratios. Although inventories are an important element of the model?s propagation mechanism, shocks to inventory efficiency or management are not an important source of business cycles. When the model is estimated over two subperiods (pre- and post-1984), changes in the volatility of inventory shocks, or in structural parameters associated with inventories play a minor role in reducing the volatility of output.
AUTHORS: Schiantarelli, Fabio; Iacoviello, Matteo; Schuh, Scott
DATE: 2007


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