The Korean Economic Review
Coordination on Use of Non-deferred Electronic Payment Instruments
Pidong Huang (Korea University) and Manjong Lee (Korea University)Year 2015Vol. 31No. 1
In the use of electronic payment technology, there is strategic complementarity and henceroom for self-fulfilling multiple equilibria. But existing relevant literature is silent abouthow agents’ expectations become coordinated. This paper resolves the coordination problemin the use of a non-deferred electronic means of payment, which can be represented by adebit card. We focus on that because it is almost a perfect substitute for cash. The presence ofexogenous shocks that have a fundamental impact on the cost of the technology makes agentscoordinate their expectations in a particular way. We also show that a high inflation and adistortionary financing scheme for debit-card transactions cost disturb coordination in theuse of debit cards.