The trade-off between cash and a debit card as a means of payment is incorporated into a search-theoretic model. A buyer incurs the proportional cost of carrying cash into the decentralized goods market, and a seller accepting a debit card bears a fixed record-keeping cost. In an equilibrium,...

Using a standard Ramsey approach, we examine the optimal allocation of social cost for an electronic payment system in the context of a dynamic general equilibrium model. The benevolent government provides electronic payment services and allocates relevant social cost through taxation on the...