Does rounding matter for payment efficiency?

Theory predicts that dismissing the 1 and 2 euro cent coins fromthe denominational range of the euro leads to more paymentefficiency. To examine whether this theory holds true in practice,we collected data for the Netherlands before and after September 12004, which marks the day that retail stores were allowed to roundall amounts at 5 euro cents. The data consist of wallet contentsfor three cross sections of individuals. We propose a multivariatePoisson- log Normal model to analyze these data. We find thatrounding leads to less 1 and 2 cent coins in wallets, but thatstill other coins are over or underrepresented, thereby suggestingthat the euro range does not yet lead to fully efficient paymentbehavior.cash payment;euro denomination;maximum simulated likelihood;multivariate poisson-log normal