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Paper Abstract
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As utility services expand throughout the developing world, providers must grapple with how to set prices to recover average costs. Data from a multi-year randomized pricing experiment among nearly 1500 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 subsidize their present selves.
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Paper Citation
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Quy-Toan Do and Hanan Jacoby, "Optimal Pricing of a New Utility Service: The Case of Piped Water in Vietnam",
Policy Research Working Paper 9207: World Bank, April 2020.
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Paper URL
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https://documents.worldbank.org/en/publication/documents-reports/documentdetail/321751586281645715/optimal-pricing-of-a-new-utility-service-the-case-of-piped-water-in-vietnam
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