Thread: For the economists in the room

For all you economists out there, chew on this: In Brazil most internet cafes are prepaid with diminishing per unit prices (ie 15 min costs .50 reais, 30 min costs .75 reais, 1 hour costs .85 reais), whereas everywhere else I´ve been has you pay afterwards with a flat rate per unit of time ( ie 1 dollar per hour with a half hour being .50 dollars and 1.5 hours at 1.50 dollars). The brazil system seems to do a good job of taking advantage of diminishing marginal utility and ostensibly would convince people to consume more time than a flat rate would. But, I think that the flat rate pay after system has it´s own advantage. It allows the internet cafe operator to take advantage of the fact that people make good decisions ahead of time but bad decisions in the moment. By that I mean that if you have to pay ahead of time you will consume less than if you have to pay after because that extra minute now seems like no big deal. The question is, which system is better for the proprietor?

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