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Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia

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Author Info
Nava Ashraf
James Berry
Jesse M. Shapiro

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Abstract

The controversy over whether and how much to charge for health products in the developing world rests, in part, on whether higher prices can increase use, either by targeting distribution to high-use households (a screening effect), or by stimulating use psychologically through a sunk-cost effect. We develop a methodology for separating these two effects. We implement the methodology in a field experiment in Zambia using door-to-door marketing of a home water purification solution. We find that higher prices screen out those who use the product less. By contrast, we find no consistent evidence of sunk-cost effects.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13247.

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Date of creation: Jul 2007
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Handle: RePEc:nbr:nberwo:13247

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Find related papers by JEL classification:
C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Abhijit V. Banerjee & Esther Duflo, 2008. "The Experimental Approach to Development Economics," NBER Working Papers 14467, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Alfredo R. Paloyo, 2009. "Co-pay and Feel Okay: Evidence of Illusory Health Gains from a Health Insurance Reform," Ruhr Economic Papers 0142, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  3. Jessica Cohen & Pascaline Dupas, 2008. "Free Distribution or Cost-Sharing? Evidence from a Malaria Prevention Experiment," NBER Working Papers 14406, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Rebecca Ratner & Dilip Soman & Gal Zauberman & Dan Ariely & Ziv Carmon & Punam Keller & B. Kim & Fern Lin & Selin Malkoc & Deborah Small & Klaus Wertenbroch, 2008. "How behavioral decision research can enhance consumer welfare: From freedom of choice to paternalistic intervention," Marketing Letters, Springer, vol. 19(3), pages 383-397, December. [Downloadable!] (restricted)
  5. Banerjee, Abhijit & Duflo, Esther, 2008. "The Experimental Approach to Development Economics," CEPR Discussion Papers 7037, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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