Over millennia, mankind has used hard cash in various forms ranging from shells to gold coins and paper. More recently, cash has become unpopular in political circles, as it effectively restricts states’ power to tax (explicitly or via negative interest rates) or to survey and potentially...

A controversial aspect of payment cards has been the “no-surcharge rule.” This rule, which is part of the contract between the card provider and a merchant, states that the merchant cannot charge a customer who pays by card more than a customer who pays by cash. In this paper we consider the...

We investigate the role of settlement in a dynamic model of a payment system where the ability of participants to perform certain welfare-improving transactions is subject to random and unobservable shocks. In the absence of settlement, the full information first-best allocation cannot be...