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Addressing self-disconnection among prepayment energy consumers: A behavioural approach

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  • Marta Rocha
  • Michelle Baddeley
  • Michael G. Pollitt

Abstract

This paper uses insights from the study of self-control in decision-making to remedy the problem of self-disconnection among energy prepayment consumers. Self-disconnection happens when consumers exhaust all available credit in their meter and are left without supply of energy. This has serious consequences for the wellbeing of consumers and may increase firms' costs. We design a mechanism composed of a commitment contract and a reminder in order to minimize the number of self—disconnectons. We empirically assess this mechanism by examining (1) the determinants of self-disconnecton and (2) the choice of different commitment contracts. we show that self-control plays a role in self-disconnection and we are able to identify in our sample, those consumers who benefit from a commitment contract. Moreover we find a demand to commitment and an opportunity to save among those consumers who need a commitment contract.

Suggested Citation

  • Marta Rocha & Michelle Baddeley & Michael G. Pollitt, 2013. "Addressing self-disconnection among prepayment energy consumers: A behavioural approach," Cambridge Working Papers in Economics 1353, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1353
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    Cited by:

    1. Michael G. Pollitt, 2016. "Electricity Network Charging for Flexibility," Working Papers EPRG 1623, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Burlinson, Andrew & Giulietti, Monica & Law, Cherry & Liu, Hui-Hsuan, 2021. "Fuel poverty and financial distress," Energy Economics, Elsevier, vol. 102(C).
    3. Oseni, Musiliu O., 2015. "Assessing the consumers’ willingness to adopt a prepayment metering system in Nigeria," Energy Policy, Elsevier, vol. 86(C), pages 154-165.
    4. Werthschulte, Madeline, 2023. "Present focus and billing systems: Testing ‘pay-as-you-go’ vs. ‘pay-later’," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 108-121.
    5. Bergmann, Ariel & Burton, Bruce & Klaes, Matthias, 2021. "European perceptions on crowdfunding for renewables: Positivity and pragmatism," Ecological Economics, Elsevier, vol. 179(C).

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    More about this item

    Keywords

    Commitment contract Self control; Prepayment meter Self-disconnection; Reminder Classification-JEL 003; 012; D91;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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