IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v93y2025ics0957178725000086.html
   My bibliography  Save this article

Does the payment vehicle matter for valuing improved electricity reliability? A discrete choice experiment in Ethiopia

Author

Listed:
  • Meles, Tensay Hadush
  • Mekonnen, Alemu
  • Jeuland, Marc
  • Beyene, Abebe D.
  • Klug, Thomas
  • Hassen, Sied
  • Sebsibie, Samuel
  • Pattanayak, Subhrendu K.

Abstract

Frequent and prolonged power outages severely impede business operations in many developing countries. Given resource constraints, estimating the value of improved electricity reliability in such contexts is crucial for justifying related investments. This analysis uses a split-sample design to examine whether business enterprises in Addis Ababa, Ethiopia, have different valuations for improved power supply reliability under two payment vehicles (electricity bill increases and tax revenue allocation). Results show that these businesses are willing to pay (WTP) an average of US$33 per year for a 1-h monthly reduction in outages and US$24 per year for one less outage per month. These amounts represent approximately 11% and 8% of the typical annual electricity bill of 10,615 Birr (US$295), respectively, highlighting that businesses place substantial value on electricity reliability. We find no significant differences in preferences or WTP estimates between the bill and tax payment vehicle sub-samples, suggesting that tax payment vehicles are as credible as bill increases in stated preference studies and that multiple mechanisms for financing power reliability investments may be feasible in practice.

Suggested Citation

  • Meles, Tensay Hadush & Mekonnen, Alemu & Jeuland, Marc & Beyene, Abebe D. & Klug, Thomas & Hassen, Sied & Sebsibie, Samuel & Pattanayak, Subhrendu K., 2025. "Does the payment vehicle matter for valuing improved electricity reliability? A discrete choice experiment in Ethiopia," Utilities Policy, Elsevier, vol. 93(C).
  • Handle: RePEc:eee:juipol:v:93:y:2025:i:c:s0957178725000086
    DOI: 10.1016/j.jup.2025.101893
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178725000086
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jup.2025.101893?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Carlsson, Fredrik & Demeke, Eyoual & Martinsson, Peter & Tesemma, Tewodros, 2020. "Cost of power outages for manufacturing firms in Ethiopia: A stated preference study," Energy Economics, Elsevier, vol. 88(C).
    2. Ando, Amy W. & Cadavid, Catalina Londoño & Netusil, Noelwah R. & Parthum, Bryan, 2020. "Willingness-to-volunteer and stability of preferences between cities: Estimating the benefits of stormwater management," Journal of Environmental Economics and Management, Elsevier, vol. 99(C).
    3. Zawojska, Ewa & Bartczak, Anna & Czajkowski, Mikołaj, 2019. "Disentangling the effects of policy and payment consequentiality and risk attitudes on stated preferences," Journal of Environmental Economics and Management, Elsevier, vol. 93(C), pages 63-84.
    4. Abdullah, Sabah & Mariel, Petr, 2010. "Choice experiment study on the willingness to pay to improve electricity services," Energy Policy, Elsevier, vol. 38(8), pages 4570-4581, August.
    5. Hagedoorn, Liselotte C. & Koetse, Mark J. & van Beukering, Pieter J. H. & Brander, Luke M., 2020. "Time equals money? Valuing ecosystem-based adaptation in a developing country context," Environment and Development Economics, Cambridge University Press, vol. 25(5), pages 482-508, October.
    6. Kassahun, Habtamu Tilahun & Jacobsen, Jette Bredahl & Nicholson, Charles F., 2020. "Revisiting money and labor for valuing environmental goods and services in developing countries," Ecological Economics, Elsevier, vol. 177(C).
    7. Fisher-Vanden, Karen & Mansur, Erin T. & Wang, Qiong (Juliana), 2015. "Electricity shortages and firm productivity: Evidence from China's industrial firms," Journal of Development Economics, Elsevier, vol. 114(C), pages 172-188.
    8. Carlsson, Fredrik & Martinsson, Peter, 2008. "Does it matter when a power outage occurs? -- A choice experiment study on the willingness to pay to avoid power outages," Energy Economics, Elsevier, vol. 30(3), pages 1232-1245, May.
    9. James A Robinson, 2023. "Tax Aversion and the Social Contract in Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 32(Supplemen), pages 33-56.
    10. Dale Whittington, 2010. "What Have We Learned from 20 Years of Stated Preference Research in Less-Developed Countries?," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 209-236, October.
    11. Meles, Tensay Hadush & Mekonnen, Alemu & Beyene, Abebe D. & Hassen, Sied & Pattanayak, Subhrendu K. & Sebsibie, Samuel & Klug, Thomas & Jeuland, Marc, 2021. "Households' valuation of power outages in major cities of Ethiopia: An application of stated preference methods," Energy Economics, Elsevier, vol. 102(C).
    12. Nick Hanley & Mikołaj Czajkowski, 2019. "The Role of Stated Preference Valuation Methods in Understanding Choices and Informing Policy," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 13(2), pages 248-266.
    13. Hunt Allcott & Allan Collard-Wexler & Stephen D. O'Connell, 2016. "How Do Electricity Shortages Affect Industry? Evidence from India," American Economic Review, American Economic Association, vol. 106(3), pages 587-624, March.
    14. Arne Hole & Julie Kolstad, 2012. "Mixed logit estimation of willingness to pay distributions: a comparison of models in preference and WTP space using data from a health-related choice experiment," Empirical Economics, Springer, vol. 42(2), pages 445-469, April.
    15. Mark Morrison & Craig Nalder, 2009. "Willingness to Pay for Improved Quality of Electricity Supply Across Business Type and Location," The Energy Journal, , vol. 30(2), pages 117-134, April.
    16. Tobias Börger & Tenaw G. Abate & Margrethe Aanesen & Ewa Zawojska, 2021. "Payment and Policy Consequentiality in Dichotomous Choice Contingent Valuation: Experimental Design Effects on Self-Reported Perceptions," Land Economics, University of Wisconsin Press, vol. 97(2), pages 407-424.
    17. Anna Alberini & evgenijs Steinbuks & Govinda Timilsina, 2022. "How Valuable is the Reliability of Residential Electricity Supply in Low-Income Countries? Evidence from Nepal," The Energy Journal, , vol. 43(4), pages 1-26, May.
    18. Sandorf, Erlend Dancke & Aanesen, Margrethe & Navrud, Ståle, 2016. "Valuing unfamiliar and complex environmental goods: A comparison of valuation workshops and internet panel surveys with videos," Ecological Economics, Elsevier, vol. 129(C), pages 50-61.
    19. Richard Carson & Theodore Groves, 2007. "Incentive and informational properties of preference questions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 181-210, May.
    20. Meles, Tensay Hadush & Lokina, Razack & Mtenga, Erica Louis & Tibanywana, Julieth Julius, 2023. "Stated preferences with survey consequentiality and outcome uncertainty: A split sample discrete choice experiment," EfD Discussion Paper 23-16, Environment for Development, University of Gothenburg.
    21. Abdisa, Lamessa T., 2018. "Power outages, economic cost, and firm performance: Evidence from Ethiopia," Utilities Policy, Elsevier, vol. 53(C), pages 111-120.
    22. Fredrik Carlsson & Peter Martinsson, 2007. "Willingness to Pay among Swedish Households to Avoid Power Outages: A Random Parameter Tobit Model Approach," The Energy Journal, , vol. 28(1), pages 75-90, January.
    23. Chen, Hao & Jin, Lu & Wang, Mingming & Guo, Lin & Wu, Jingwen, 2023. "How will power outages affect the national economic growth: Evidence from 152 countries," Energy Economics, Elsevier, vol. 126(C).
    24. Zemo, Kahsay Haile & Kassahun, Habtamu Tilahun & Olsen, Søren Bøye, 2019. "Determinants of willingness-to-pay for attributes of power outage - An empirical discrete choice experiment addressing implications for fuel switching in developing countries," Energy, Elsevier, vol. 174(C), pages 206-215.
    25. Ghosh, Ranjan & Goyal, Yugank & Rommel, Jens & Sagebiel, Julian, 2017. "Are small firms willing to pay for improved power supply? Evidence from a contingent valuation study in India," Energy Policy, Elsevier, vol. 109(C), pages 659-665.
    26. Lamessa Tariku ABDISA, 2018. "Power Outages, its Economic Cost and Firm Performance: Evidence from Ethiopia," Departmental Working Papers 2018-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    27. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, Enero-Abr.
    28. Stephie Fried & David Lagakos, 2023. "Electricity and Firm Productivity: A General-Equilibrium Approach," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(4), pages 67-103, October.
    29. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    30. Pierre-Alexandre Mahieu & Romain Crastes dit Sourd & Pascal Gastineau & Benoît Chèze & Andrea Taylor, 2024. "How Does the Cost Vector Affect Payment Consequentiality in a Binary Choice Contingent Valuation Survey?," Land Economics, University of Wisconsin Press, vol. 100(2), pages 245-255.
    31. Ozbafli, Aygul & Jenkins, Glenn P., 2016. "Estimating the willingness to pay for reliable electricity supply: A choice experiment study," Energy Economics, Elsevier, vol. 56(C), pages 443-452.
    32. Morgan Hardy & Jamie McCasland, 2021. "Lights Off, Lights On: The Effects of Electricity Shortages on Small Firms," The World Bank Economic Review, World Bank, vol. 35(1), pages 19-33.
    33. Auriol, Emmanuelle & Warlters, Michael, 2005. "Taxation base in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 625-646, April.
    34. Tensay Hadush Meles & Razack Lokina & Erica Louis Mtenga & Julieth Julius Tibanywana, 2023. "Stated Preferences with Survey Consequentiality and Outcome Uncertainty: A Split Sample Discrete Choice Experiment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(4), pages 717-754, December.
    35. Cole, Matthew A. & Elliott, Robert J.R. & Occhiali, Giovanni & Strobl, Eric, 2018. "Power outages and firm performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 134(C), pages 150-159.
    36. Riccardo Scarpa & Mara Thiene & Kenneth Train, 2008. "Utility in Willingness to Pay Space: A Tool to Address Confounding Random Scale Effects in Destination Choice to the Alps," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 994-1010.
    37. Mark Morrison & Craig Nalder, 2009. "Willingness to Pay for Improved Quality of Electricity Supply Across Business Type and Location," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 117-134.
    38. Falentina, Anna T. & Resosudarmo, Budy P., 2019. "The impact of blackouts on the performance of micro and small enterprises: Evidence from Indonesia," World Development, Elsevier, vol. 124(C), pages 1-1.
    39. Laura O. Taylor & Ronald G. Cummings, 1999. "Unbiased Value Estimates for Environmental Goods: A Cheap Talk Design for the Contingent Valuation Method," American Economic Review, American Economic Association, vol. 89(3), pages 649-665, June.
    40. Fredrik Carlsson & Mitesh Kataria & Elina Lampi, 2010. "Dealing with Ignored Attributes in Choice Experiments on Valuation of Sweden’s Environmental Quality Objectives," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(1), pages 65-89, September.
    41. Cohen, Jed J. & Moeltner, Klaus & Reichl, Johannes & Schmidthaler, Michael, 2016. "Linking the value of energy reliability to the acceptance of energy infrastructure: Evidence from the EU," Resource and Energy Economics, Elsevier, vol. 45(C), pages 124-143.
    42. Musiliu O. Oseni, 2017. "Self-Generation and Households' Willingness to Pay for Reliable Electricity Service in Nigeria," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    43. Ama Baafra Abeberese & Charles Godfred Ackah & Patrick Opoku Asuming, 2021. "Productivity Losses and Firm Responses to Electricity Shortages: Evidence from Ghana," The World Bank Economic Review, World Bank, vol. 35(1), pages 1-18.
    44. Meles, Tensay Hadush, 2020. "Impact of power outages on households in developing countries: Evidence from Ethiopia," Energy Economics, Elsevier, vol. 91(C).
    45. Xiao, Zumian & Gao, Juanhe & Wang, Zongshu & Yin, Zhichao & Xiang, Lijin, 2022. "Power shortage and firm productivity: Evidence from the World Bank Enterprise Survey," Energy, Elsevier, vol. 247(C).
    46. Andersen, Thomas Barnebeck & Dalgaard, Carl-Johan, 2013. "Power outages and economic growth in Africa," Energy Economics, Elsevier, vol. 38(C), pages 19-23.
    47. Anna Alberini, Jevgenijs Steinbuks, and Govinda Timilsina, 2022. "How Valuable is the Reliability of Residential Electricity Supply in Low-Income Countries? Evidence from Nepal," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    48. Musiliu O. Oseni, 2017. "Self-Generation and Households’ Willingness to Pay for Reliable Electricity Service in Nigeria," The Energy Journal, , vol. 38(4), pages 165-194, July.
    49. Robert J. Johnston & Kevin J. Boyle & Wiktor (Vic) Adamowicz & Jeff Bennett & Roy Brouwer & Trudy Ann Cameron & W. Michael Hanemann & Nick Hanley & Mandy Ryan & Riccardo Scarpa & Roger Tourangeau & Ch, 2017. "Contemporary Guidance for Stated Preference Studies," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 4(2), pages 319-405.
    50. Meginnis, Keila & Hanley, Nick & Mujumbusi, Lazaaro & Lamberton, Poppy H.L., 2020. "Non-monetary numeraires: Varying the payment vehicle in a choice experiment for health interventions in Uganda," Ecological Economics, Elsevier, vol. 170(C).
    51. Andrew Daly & Stephane Hess & Kenneth Train, 2012. "Assuring finite moments for willingness to pay in random coefficient models," Transportation, Springer, vol. 39(1), pages 19-31, January.
    52. J. M. Gibson & D. Rigby & D. A. Polya & N. Russell, 2016. "Discrete Choice Experiments in Developing Countries: Willingness to Pay Versus Willingness to Work," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(4), pages 697-721, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Meles, Tensay Hadush & Lokina, Razack & Mtenga, Erica Louis & Tibanywana, Julieth Julius, 2023. "Stated preferences with survey consequentiality and outcome uncertainty: A split sample discrete choice experiment," EfD Discussion Paper 23-16, Environment for Development, University of Gothenburg.
    2. Tensay Hadush Meles & Razack Lokina & Erica Louis Mtenga & Julieth Julius Tibanywana, 2023. "Stated Preferences with Survey Consequentiality and Outcome Uncertainty: A Split Sample Discrete Choice Experiment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(4), pages 717-754, December.
    3. Meles, Tensay Hadush & Mekonnen, Alemu & Beyene, Abebe D. & Hassen, Sied & Pattanayak, Subhrendu K. & Sebsibie, Samuel & Klug, Thomas & Jeuland, Marc, 2021. "Households' valuation of power outages in major cities of Ethiopia: An application of stated preference methods," Energy Economics, Elsevier, vol. 102(C).
    4. Carlsson, Fredrik & Demeke, Eyoual & Martinsson, Peter & Tesemma, Tewodros, 2020. "Cost of power outages for manufacturing firms in Ethiopia: A stated preference study," Energy Economics, Elsevier, vol. 88(C).
    5. Hashemi, Majid, 2021. "The economic value of unsupplied electricity: Evidence from Nepal," Energy Economics, Elsevier, vol. 95(C).
    6. Aweke, Abinet Tilahun & Navrud, Ståle, 2022. "Valuing energy poverty costs: Household welfare loss from electricity blackouts in developing countries," Energy Economics, Elsevier, vol. 109(C).
    7. Meles, Tensay Hadush, 2020. "Impact of power outages on households in developing countries: Evidence from Ethiopia," Energy Economics, Elsevier, vol. 91(C).
    8. Yu, Jian & Liu, Peng & Fu, Dahai & Shi, Xunpeng, 2023. "How do power shortages affect CO2 emission intensity? Firm-level evidence from China," Energy, Elsevier, vol. 282(C).
    9. Deutschmann, Joshua W. & Postepska, Agnieszka & Sarr, Leopold, 2021. "Measuring willingness to pay for reliable electricity: Evidence from Senegal," World Development, Elsevier, vol. 138(C).
    10. Apeti,Ablam Estel & Ly,Alpha, 2023. "Power Constraints and Firm-Level Total Factor Productivity in Developing Countries," Policy Research Working Paper Series 10510, The World Bank.
    11. Kassahun, Habtamu Tilahun & Swait, Joffre & Jacobsen, Jette Bredahl, 2021. "Distortions in willingness-to-pay for public goods induced by endemic distrust in institutions," Journal of choice modelling, Elsevier, vol. 39(C).
    12. Guo, Dongmei & Li, Qin & Liu, Peng & Shi, Xunpeng & Yu, Jian, 2023. "Power shortage and firm performance: Evidence from a Chinese city power shortage index," Energy Economics, Elsevier, vol. 119(C).
    13. Amoah, Anthony & Ferrini, Silvia & Schaafsma, Marije, 2019. "Electricity outages in Ghana: Are contingent valuation estimates valid?," Energy Policy, Elsevier, vol. 135(C).
    14. Morrissey, Karyn & Plater, Andrew & Dean, Mary, 2018. "The cost of electric power outages in the residential sector: A willingness to pay approach," Applied Energy, Elsevier, vol. 212(C), pages 141-150.
    15. Abiodun, Kehinde & Gilbert, Ben, 2022. "Does universal electrification shield firms from productivity loss?," World Development Perspectives, Elsevier, vol. 28(C).
    16. Bhorat, Haroon & Köhler, Timothy, 2025. "Watts happening to work? The labour market effects of South Africa’s electricity crisis," Energy Economics, Elsevier, vol. 142(C).
    17. Apeti, Ablam Estel & Ly, Alpha, 2024. "Power constraints and firm-level total factor productivity in developing countries," Energy, Elsevier, vol. 309(C).
    18. Bao, Bingpeng & Fu, Dahai & Yu, Jian & Zhang, Ying, 2024. "Lights dim, exports down: Examining the trade effects of power shortages on Chinese manufacturing firms," China Economic Review, Elsevier, vol. 88(C).
    19. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    20. Harold, Jason & Bertsch, Valentin & Fell, Harrison, 2021. "Preferences for curtailable electricity contracts: Can curtailment benefit consumers and the electricity system?," Energy Economics, Elsevier, vol. 102(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:93:y:2025:i:c:s0957178725000086. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.