Short‐Run Subsidies and Long‐Run Adoption of New Health Products: Evidence From a Field Experiment
Short‐run subsidies for health products are common in poor countries. How do they affect long‐run adoption? A common fear among development practitioners is that one‐off subsidies may negatively affect long‐run adoption through reference‐dependence: People might anchor around the subsidized price and be unwilling to pay more for the product later. But for experience goods, one‐off subsidies could also boost long‐run adoption through learning. This paper uses data from a two‐stage randomized pricing experiment in Kenya to estimate the relative importance of these effects for a new, improved antimalarial bed net. Reduced form estimates show that a one‐time subsidy has a positive impact on willingness to pay a year later inherit. To separately identify the learning and anchoring effects, we estimate a parsimonious experience‐good model. Estimation results show a large, positive learning effect but no anchoring. We black then discuss the types of products and the contexts inherit for which these results may apply.
Volume (Year): 82 (2014)
Issue (Month): 1 (01)
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/
More information through EDIRC
|Order Information:|| Web: https://www.econometricsociety.org/publications/econometrica/access/ordering-back-issues Email: |
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.:
- Botond Koszegi & Matthew Rabin, 2005.
"A Model of Reference-Dependent Preferences,"
784828000000000341, UCLA Department of Economics.
- Botond Koszegi & Matthew Rabin, 2004. "A Model of Reference-Dependent Preferences," Method and Hist of Econ Thought 0407001, EconWPA.
- Koszegi, Botond & Rabin, Matthew, 2004. "A Model of Reference-Dependent Preferences," Department of Economics, Working Paper Series qt0w82b6nm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Esther Duflo & Michael Kremer & Jonathan Robinson, 2009.
"Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya,"
NBER Working Papers
15131, National Bureau of Economic Research, Inc.
- Esther Duflo & Michael Kremer & Jonathan Robinson, 2011. "Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya," American Economic Review, American Economic Association, vol. 101(6), pages 2350-90, October.
- Ori Heffetz & Moses Shayo, 2009.
"How Large Are Non-Budget-Constraint Effects of Prices on Demand?,"
American Economic Journal: Applied Economics,
American Economic Association, vol. 1(4), pages 170-99, October.
- Heffetz, Ori & Shayo, Moses, 2009. "How Large Are Non-Budget-Constraint Effects Of Prices On Demand?," Working Papers 53882, American Association of Wine Economists.
- Duflo, Esther & Kremer, Michael & Robinson, Jonathan, 2009. "Nudging Farmers to Utilize Fertilizer: Theory and Experimental Evidence from Kenya," CEPR Discussion Papers 7402, C.E.P.R. Discussion Papers.
- repec:tpr:qjecon:v:118:y:2003:i:1:p:73-105 is not listed on IDEAS
- repec:tpr:qjecon:v:125:y:2010:i:1:p:1-45 is not listed on IDEAS
- Dirk Bergemann & Juuso Valimaki, 1999.
"Experimentation in Markets,"
Cowles Foundation Discussion Papers
1214, Cowles Foundation for Research in Economics, Yale University.
- Foster, Andrew D & Rosenzweig, Mark R, 1995.
"Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture,"
Journal of Political Economy,
University of Chicago Press, vol. 103(6), pages 1176-1209, December.
- Mark Rosenzweig & Andrew D. Foster, . "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Home Pages _068, University of Pennsylvania.
- Oriana Bandiera & Imran Rasul, 2006.
"Social Networks and Technology Adoption in Northern Mozambique,"
Royal Economic Society, vol. 116(514), pages 869-902, October.
- Oriana Bandiera & Imran Rasul, 2002. "Social Networks and Technology Adoption in Northern Mozambique," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 35, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Oriana Bandiera & Imran Rasul, 2002. "Social networks and technology adoption in Northern Mozambique," LSE Research Online Documents on Economics 3539, London School of Economics and Political Science, LSE Library.
- Bandiera, Oriana & Rasul, Imran, 2002. "Social Networks and Technology Adoption in Northern Mozambique," CEPR Discussion Papers 3341, C.E.P.R. Discussion Papers.
- Emily Oster & Rebecca Thornton, 2009. "Determinants of Technology Adoption: Private Value and Peer Effects in Menstrual Cup Take-Up," NBER Working Papers 14828, National Bureau of Economic Research, Inc.
- Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
- Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
- Munshi, Kaivan, 2004. "Social learning in a heterogeneous population: technology diffusion in the Indian Green Revolution," Journal of Development Economics, Elsevier, vol. 73(1), pages 185-213, February.
- Dirk Bergemann & Juuso VÃ¤limÃ¤ki, 2006. "Dynamic Pricing of New Experience Goods," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 713-743, August.
- Giuseppe Moscarini & Lones Smith, 2001. "The Optimal Level of Experimentation," Econometrica, Econometric Society, vol. 69(6), pages 1629-1644, November.
- Bagwell, Kyle & Riordan, Michael H, 1991.
"High and Declining Prices Signal Product Quality,"
American Economic Review,
American Economic Association, vol. 81(1), pages 224-39, March.
- Uri Simonsohn & George Loewenstein, 2006. "Mistake #37: The Effect of Previously Encountered Prices on Current Housing Demand," Economic Journal, Royal Economic Society, vol. 116(508), pages 175-199, 01.
- Munshi, Kaivan & Myaux, Jacques, 2006. "Social norms and the fertility transition," Journal of Development Economics, Elsevier, vol. 80(1), pages 1-38, June.
When requesting a correction, please mention this item's handle: RePEc:wly:emetrp:v:82:y:2014:i:1:p:197-228. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.