Are Farmers Willing to Invest on Weather Forecast Information? Empirical Evidence from Tigray, Ethiopia

This study aims to estimate the average willingness to pay (WTP) for weather forecast information and identify its determinants. We use a contingent valuation method based on single and double-bound dichotomous choice elicitation questions to achieve this. Three models (probit, interval, and bivariate probit) are estimated using data collected from 400 households in Tigray, Ethiopia during the 2020/21 period. We found that as the initial bid amount increases, the proportion of positive responses decreases, while the proportion of negative responses increases. As expected, the coefficient of the initial bid indicates that a 1% increase in the initial bid reduces the probability of accepting the offered amount by 0.240%. Our findings align with the economic theory of demand, which states that as the price of a good increases, its demand decreases, and vice versa. Unwilling farmers have shown a higher monthly discount rate and a lower risk preference than willing farmers. On average, farmers are willing to pay between 2463.53 and 4065.33 Ethiopian Currency Birr (ETB) for weather forecast information. Specifically, irrigation farmers are willing to pay a mean value of ETB 3326 at a minimum and ETB 4359.5 at a maximum per year for WFI. In contrast, rain-fed farmers have a mean WTP range of ETB 2738.2 to 3258.7 per year. Therefore, policymakers should consider the introduction of a new mobile network operator (MNO) that provides highly accurate and localized weather information; weather forecasts are incredibly valuable for the millions of smallholder farmers who rely on rainfall for their daily farming activities.