Pay Now or Later? The Impact of Temporal Separation of Payments and Consumption on Consumer Payment Preferences

Abstract

In this chapter, we draw on the behavioral economics literature to identify the conditions under which consumers would prefer one of three pricing schemes (pre-payment, pay-as-you-go, and post-payment). We suggest that consumer preferences for particular pricing schemes are likely to be determined by systematic relationships that exist among a variety of psychological variables. We offer nine empirical propositions that identify when consumers will prefer different pricing schemes.