You should pay in pesos, across the board in almost every situation. The only convincing point I have ever heard in favor of dollars is for one very specific situation: tipping strippers. But that was when the exchange rate was less favorable against the dollar. In that case, you may have wanted to bring a small stack of $1 bills (or a large stack—I have no idea how much/whether you love the strippers!). But now that 20 pesos equals almost exactly $1 USD, you can simply make sure you have a stack of 20 peso notes if you are visiting a strip club.
Paying in cash is preferable for all small transactions. . . . → Read More: Should I Pay with Pesos or Dollars in Puerto Vallarta? Where Should I Exchange Currency?
