Do consumers pay more using debit cards than cash?

• We study if the payment method affects willingness-to-pay.
• Debit cards lead to higher average bids than cash.
• Our results are robust to cash-on-hand constraints, price familiarity, consumption habits and spending type.
• The representation of money seems to matter for consumer valuations.

We conduct an incentivized experiment to study the effect of the payment method on spending. We find that the willingness to pay is higher when subjects pay with debit cards compared to cash. The result is robust to controlling for cash-on-hand constraints, spending type, price familiarity and consumption habits of the products. The evidence thus suggests that different representations of money matters for consumer behavior. Such results further tease out the underlying mechanism of how payment methods influence spending behavior, which poses important implications for both consumers and merchants, as well as designing of digitalized payment in the future.

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