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Short‐run subsidies and long‐run willingness to pay: Learning and anchoring in an agricultural experiment in Ethiopia

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  • Solomon Balew
  • Erwin Bulte
  • Menale Kassie

Abstract

We study how temporary provision of an agricultural innovation at zero cost affects long‐run demand for that innovation. Our experimental design enables us to distinguish between an “anchoring effect” of subsidies and a “learning effect.” We document large and persistent anchoring and learning effects. For the innovation that we consider, an integrated pest management (IPM) package for Ethiopian smallholder farmers, the learning effect dominates the anchoring effect, so temporary subsidized provision promotes long‐run technology diffusion.

Suggested Citation

  • Solomon Balew & Erwin Bulte & Menale Kassie, 2025. "Short‐run subsidies and long‐run willingness to pay: Learning and anchoring in an agricultural experiment in Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 107(2), pages 655-669, March.
    • Handle: RePEc:wly:ajagec:v:107:y:2025:i:2:p:655-669
    DOI: 10.1111/ajae.12498
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    References listed on IDEAS

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    1. Burchardi, Konrad B. & de Quidt, Jonathan & Gulesci, Selim & Lerva, Benedetta & Tripodi, Stefano, 2021. "Testing willingness to pay elicitation mechanisms in the field: Evidence from Uganda," Journal of Development Economics, Elsevier, vol. 152(C).
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    8. Solomon Balew & Erwin Bulte & Zewdu Abro & Menale Kassie, 2023. "Incentivizing and nudging farmers to spread information: Experimental evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(3), pages 994-1010, May.
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