Economics of Payments II
March 29-30, 2006

Economists in recent years have opened many interesting avenues for research on the economics of payments. Contributions in industrial organization of two-sided markets, in monetary theory, and in empirical economics have come from research on the economics of payments. In addition, payments markets continue to be dynamic. Among such developments are the rapid changes in the use of various payment instruments around the world including, for example, the continuing decline in check usage in the U.S., the growth of debit and credit card payments in many countries, the continued development of personal online payment methods, the redesign of large-value payment systems in many countries, and the response to various antitrust disputes involving card-based payments.

The conference on the Economics of Payments will bring together central bank and academic economists to discuss these developments and other issues of interest to researchers in this area. Conference Location
Federal Reserve Bank of New York
12th floor Conference Center
33 Liberty Street
New York, New York

Conference Organizers
William Roberds, Federal Reserve Bank of Atlanta
James McAndrews, Federal Reserve Bank of New York
Morten Bech, Federal Reserve Bank of New York
David Skeie, Federal Reserve Bank of New York
Antoine Martin, Federal Reserve Bank of New York

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Wednesday, March 29
8:15 a.m. Continental breakfast

8:45 a.m.

Introductory Remarks:

Timothy Geithner
Federal Reserve Bank of New York
9:00 a.m. Invited Lecture

Central Bank Credit in the Theory of Money and Payments

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Jeff Lacker
Federal Reserve Bank of Richmond
10:00 a.m.


10:30 a.m.
Session I

Payments in a Historical Perspective

Chair: John A. Weinberg, Federal Reserve Bank of Richmond

Towards a More Perfect American Payments Union: The Civil War as a Political Economic Watershed PDF

John James, University of Virginia, and David Weiman, Barnard College, Columbia University

Discussant: Bruce Champ, Federal Reserve Bank of Cleveland

Payment Systems and the Collapse of the Banking System During the Great Depression

Gary Richardson, University of California, Irvine

Discussant: Joseph Mason, Drexel University

Noon Lunch
2:00 p.m.
Session II

Theoretical Studies of Payments, Past and Present

Chair: Sujit Chakravorti, Federal Reserve Bank of Chicago

A Model of Banknote Discounts PDF
Laurence Ales, Francesca Carapella, Pricila Maziero, and Warren Weber, Federal Reserve Bank of Minneapolis and University of Minnesota

Discussant: Francois Velde, Federal Reserve Bank of Chicago

Policy in International Payment Systems with a Timing Friction PDF

James Chapman, University of Iowa

Discussant: Hiroshi Fujiki, Bank of Japan

3:30 p.m.


4:00 p.m.
Session III

Studies of Wholesale Payment Systems

Chair: David Mills, Board of Governors of the Federal Reserve System

A Dynamic Model of Settlement PDF

Thorsten Koeppl, Queen’s University; Cyril Monnet, European Central Bank; and Ted Temzelides, University of Pittsburgh

Discussant: Nobuhiro Kiyotaki, London School of Economics and Federal Reserve Bank of New York

Optimal Settlement Rules for Payment Systems PDF

Benjamin Lester, University of Pennsylvania; Stephen Millard and Matthew Willison, Bank of EnglandDiscussant: James Bullard, Federal Reserve Bank of St. Louis

5:30 p.m. Reception

Thursday, March 30

8:30 a.m.

Continental breakfast

9:00 a.m.
Session I

Choice of Payments by Consumers

Chair: Richard Porter, Federal Reserve Bank of Chicago

How People Pay: Evidence from Grocery Store Data PDF

Elizabeth Klee, Board of Governors of the Federal Reserve System

Discussant: Joanna Stavins, Federal Reserve Bank of Boston

The Choice at the Checkout: Quantifying Demand Across Payment Instruments PDF

Ronald Borzekowski and Elizabeth Kiser, Board of Governors of the Federal Reserve System

Discussant: David Bounie, École National Supérieure des Télécommunications

10:30 a.m. Break
11:00 a.m.

Invited Lecture

Why Pay?

Charles Kahn, Bailey Memorial Chair of Money, Banking and Finance, University of Illinois

Noon Lunch
1:30 p.m.
Session II

Pricing of Retail Payments Methods

Chair: Stuart Weiner, Federal Reserve Bank of Kansas City

The Effect of Transaction Pricing on the Adoption of Electronic Payments: A Cross-Country Comparison PDF

Wilko Bolt, De Nederlandsche Bank; David Humphrey, Florida State University; and Roland Uittenbogaard, De Nederlandsche Bank

Discussant: Andrew Stone, Reserve Bank of Australia

The Cost of Being Late: The Case of Credit Card Penalty Fees PDF

Nadia Massoud, University of Alberta; Anthony Saunders, New York University; and Barry Scholnick, University of Alberta

Discussant: Marc Fusaro, East Carolina University

3:00 p.m. Break
3:30 p.m.
Session III

The Credit Card Debt Puzzle

Chair: Paula Hernandez, Texas A&M University

A Model of Money and Credit with Application to the Credit Card Debt Puzzle PDF

Irina Telyukova and Randall Wright, University of Pennsylvania

Discussant: Ed Nosal, Federal Reserve Bank of Cleveland

4:15 p.m. Close