We study adoption by more than 150,000 households of an optional transitional water tariff implemented in the South-East of England in conjunction with an universal metering programme. We document how inertia leads customers to relinquish substantial financial gains, with less than a third of customers who would benefit from adopting the transitional tariff actually doing so. We also show how households responds not only to overall gains, but also to more short-term gains from adopting the tariff.
Households in high income/high education neighbourhoods display a higher responsiveness to potential savings, as do households where the contract holder is of prime age instead of being more senior or junior. Finally, the probability of adoption is positively impacted by adoption by neighbours, thus suggesting the presence of peer effects. We also look at the timing of the call, showing how most customers choose to call early on, when less information is available, but the issue is more prominent. The choice of when to call is consistent with customers taking into account the option value of waiting, as well as future consumption patterns.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.