Prepayment, Price, and Welfare: A Study on Electricity Demand in Indonesia
As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Geneva Graduate Institute is pleased to invite you to a public talk given by Prof. Imelda.
ABSTRACT
In recent decades, there has been a growing trend among developing countries towards prepayment systems for utilities, such as electricity. These systems can enhance the revenue recovery of utility providers, but their welfare effects on consumers are unclear. Previous research has suggested that paying in advance reduces consumption, but the mechanisms behind this effect are not well explained. To shed light on this issue, we empirically investigate how prepayment influences consumption through price salience, both in the short and long run. Using quasi-experimental variation in the tariff changes, we find compelling evidence that prepaid users are up to four times more elastic than postpaid users. The estimated price elasticity declines smoothly for prepaid users, from -0.15 after one year to -0.46 after six years, whereas postpaid users display an elasticity of -0.04 to -0.08. Our willingness-to-pay survey suggests positive consumer welfare and our applied welfare analysis highlights the gains from the prepayment system. Understanding the interaction between pricing policies and technology adoption will enhance efforts in promoting energy conservation in many developing countries.
Prepayment, Price, and Welfare: A Study on Electricity Demand in Indonesia, joint with Anna Lou Abatayo and Budy Ressosudarmo
About the SpeakER
Imelda is the André Hoffmann Assistant Professor in Environmental and Resource Economics and part of the Center for International Environmental Studies since 2021. She is an applied microeconomist and she received her PhD in Economics from the University of Hawaii in 2018. She did her postdoctoral research at the Department of Economics, Carlos III University in Madrid, where she investigates policies to achieve the clean energy transition. Her research explores the intersections of health, energy, gender, and environmental economics, looking at how clean energy transition and policies can improve welfare and market outcomes.