The Liquidity Effect

29.03.2016 • Politics and War

From Merryn’s Blog (GBR) –
I wrote here a few months ago about one of the most worrying things about the possibility of a ban on using cash: we spend much more when we spend with debit and credit cards than when we spend with cash (see here for that piece and here for why our central bankers are desperate to ban cash in the first place).
The New York Times has just reported on one study on this I hadn’t noticed before. It isn’t new – it was done in 2001 by Duncan Simester, a professor of marketing at MIT. You can read the full paper here, but the method and the findings were simple. Simester and a colleague held auctions of tickets to popular local sports games for MBA students. Some were cash only. Others were credit card only. The result? When they had to pay with credit cards, the MBA students bid roughly twice as much as they did when only cash was an option.

-Read More Here-

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