Consumers pay for hundreds of goods and services each year, but across households and across goods, consumers do not choose to pay the same way. This paper posits that payment choices depend in part on consumers' propensity to adopt new technologies and in part on the nature of the transaction....

This paper presents models that explain why merchants accept payment cards even when the fees they face exceed the transactional benefits they receive from a card transaction. The prevalent assumption – merchants accept cards only when they earn positive net transactional benefits – holds only...