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Optimal Pricing of a New Utility Service: The Case of Piped Water in Vietnam

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  • Quy-Toan Do
  • Hanan G Jacoby

Abstract

As utility services expand throughout the developing world, providers must grapple with how to set prices to recover average costs. Data from a multiyear randomised pricing experiment among nearly 1,500 recently connected piped water customers in Vietnam reveal month-to-month demand persistence. Based on structural demand estimation, we document how endogenous preferences, if unaccounted for, can lead to low take-up and thereby threaten the financial viability of the new water utility. We also show that such demand persistence calls for pricing schemes that defer lump-sum payment, effectively allowing future consumers to subsidise their present selves.

Suggested Citation

  • Quy-Toan Do & Hanan G Jacoby, 2025. "Optimal Pricing of a New Utility Service: The Case of Piped Water in Vietnam," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(3), pages 1773-1800.
    • Handle: RePEc:oup:restud:v:92:y:2025:i:3:p:1773-1800.
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    File URL: http://hdl.handle.net/10.1093/restud/rdae074
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