Eliminating the fractional part of currency from circulation (Pennies, Cents, Paras, Kopeikas). An Analytic Study: An Analytic Study

TY - JOUR

T1 - Eliminating the fractional part of currency from circulation (Pennies, Cents, Paras, Kopeikas). An Analytic Study

T2 - An Analytic Study

AU - Raseta, Marko

PY - 2017/6/1

Y1 - 2017/6/1

N2 - We present an analytical study which demonstrates that deterministic rounding policies are, in the absence of the fractional part of currency, exploited by retailers via strategic pricing. This shows that deterministic policies cannot be optimal. We then introduce fair stochastic rounding policies and demonstrate their power on the case of cash transactions in the U.S. in the potential absence of the penny. We deduce that the U.S. can safely remove both the penny and nickel from circulation provided these policies are carefully implemented.

AB - We present an analytical study which demonstrates that deterministic rounding policies are, in the absence of the fractional part of currency, exploited by retailers via strategic pricing. This shows that deterministic policies cannot be optimal. We then introduce fair stochastic rounding policies and demonstrate their power on the case of cash transactions in the U.S. in the potential absence of the penny. We deduce that the U.S. can safely remove both the penny and nickel from circulation provided these policies are carefully implemented.

KW - randomised rounding

KW - rounding tax

KW - strategic pricing

UR - http://www.scopus.com/inward/record.url?scp=85021690338&partnerID=8YFLogxK

U2 - 10.1057/s41302-016-0074-x

DO - 10.1057/s41302-016-0074-x

M3 - Article

VL - 43

SP - 520

EP - 529

JO - Eastern Economic Journal

JF - Eastern Economic Journal

IS - 3

ER -