 Present focus and billing systems: Testing ‘pay-as-you-go’ vs. ‘pay-later’Madeline Werthschulte Journal of Economic Behavior & Organization, 2023, vol. 212, issue C, 108-121 Abstract: When customers purchase goods provided by public utilities, such as telecommunications, water, gas or electricity, the predominant payment system is pay-later billing. This paper tests the effectiveness of a pay-as-you-go system and the importance of payment timing in reducing consumption. I conduct a lab experiment which mimics an energy consumption choice and randomizes the timing of when consumption costs are paid: Either immediately (‘pay-as-you-go’) or one-week after consumption (‘pay-later’). Results show that pay-as-you-go billing significantly decreases energy consumption. Yet the decrease in consumption comes at the cost of needing more work time to complete a fixed number of real-effort tasks. As the design controls for a number of contaminating effects, present-focused discounting of the future energy bill under the pay-later system is the likely explanation for the change in behavior. Keywords: Billing systems; Present focus; Discounting; Lab experiment; Energy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:212:y:2023:i:c:p:108-121 DOI: 10.1016/j.jebo.2023.05.032 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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