I use a mixture of shredded paper and wood chips through out the whole cage. I spread a good thick layer of shredded paper first and then add a thin layer of wood chips. As someone else said above, you do need to be very careful to make sure the shredded paper hasn't got sharp pieces of staples (or even worse someone has put thier credit card through it and has made sharp bits of plastic!) I've used this method for the last few years and it has worked relaly well, also you are doing a little bit towards recycling that shredded paper ( and it's cheaper! ) I forgot to add, I always line the cage first with some layers of newspaper.