Prepayment, Salience, and Welfare

Imelda, Anna Lou Abatayo, Budy Resusodarmo and * Imelda
Authors registered in the RePEc Author Service: Imelda

No 11579, CESifo Working Paper Series from CESifo

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: electricity; prepayment; elasticity; salience; energy conservation (search for similar items in EconPapers)
JEL-codes: I30 Q41 Q48 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Prepayment, Salience, and Welfare (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11579

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