Inconvenience, Liquidity Constraints, and the Adoption of Off-Grid Lighting Solutions
Abstract
A significant proportion of world's population does not have access to grid-based electricity, and so relies on off-grid lighting solutions. Rechargeable bulb technology is becoming prominent as an alternative off-grid lighting model in developing countries. In this paper, we explore the consumer behavior and the operational inefficiencies that result under this model. Specifically, we are interested in measuring the impact of inconvenience (of travel to recharge the bulb) which is a peculiar feature of this model along with the impact of liquidity constraints on bulb usage. We also discuss the efficacy of strategies that address these factors. We employ multiple methodologies: we first build a model of recharge decisions and theoretically explore its properties. To test (both ordinal and cardinal) predictions of this model, and to examine the performance of counterfactual strategies, we conduct field experiments in Rwanda in collaboration with a company that operates rechargeable bulbs business. Using our structural model as the data generating process, we then estimate its parameters by fitting it to the experimental data. We show that the fitted model predicts the data reasonably well. Using the estimated model, we find that inconvenience-based operational strategies which are usually ignored by the firms and the policymakers tend to perform as well as, and sometimes better than price-based strategies in terms of improving the bulb usage.
