Prepayment, Salience, and Welfare

Imelda ~,, Anna Lou Abatayo and Budy Resusodarmo

No 19778, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The timing of payment can enhance salience, making customers more price-responsive when paying before consumption rather than after. This study examines Indonesia's nationwide switch to prepaid electricity metering, impacting over 40 million households. We find that prepaid metering users are twice as price-elastic as postpaid users. We also find a positive willingness to pay for prepaid metering, suggesting consumer welfare gains. As prices rise, prepaid metering reduces excess burden by 1.5% and CO2 emissions by nearly 6%. These findings suggest prepaid meters can support climate policy goals by promoting energy conservation without imposing significant burdens on consumers.

Keywords: prepayment (search for similar items in EconPapers)
JEL-codes: I30 Q41 Q48 (search for similar items in EconPapers)
Date: 2024-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19778 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:19778

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19778

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().