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Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana

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  • Berry, James
  • Fischer, Greg
  • Guiteras, Raymond

Abstract

We demonstrate the benefits and feasibility of using the Becker-DeGroot-Marschak (BDM) mechanism to elicit precise, individual-level willingness to pay and thereby enhance the information generated by randomized experiments. With a relatively small sample and minor modifications to a standard field experiment design, we can directly estimate demand, study the effect of prices on usage through screening and psychological (sunk-cost) effects, and compute heterogeneous marginal treatment effects. Applying the mechanism to a field experiment studying clean drinking water technology in northern Ghana, we show that even in an environment with low literacy and numeracy, BDM produces sensible results. We find that although willingness to pay for clean water technology is low relative to the cost, demand is surprisingly inelastic at low prices; prices do not generate significant sunk-cost effects; and treatment effects are heterogeneous with respect to valuation and consistent with outcomes being affected by effort expenditure.

Suggested Citation

  • Berry, James & Fischer, Greg & Guiteras, Raymond, 2015. "Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana," CEPR Discussion Papers 10703, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10703
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    References listed on IDEAS

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    Cited by:

    1. Sylvain Chassang & Gerard Padro I Miquel & Erik Snowberg, 2012. "Selective Trials: A Principal-Agent Approach to Randomized Controlled Experiments," American Economic Review, American Economic Association, vol. 102(4), pages 1279-1309, June.
    2. Abhijit Banerjee & Sylvain Chassang & Erik Snowberg, 2016. "Decision Theoretic Approaches to Experiment Design and External Validity," NBER Working Papers 22167, National Bureau of Economic Research, Inc.
    3. Bridget Hoffmann, 2016. "Do Non-Monetary Prices Target the Poor?: Evidence from a Field Experiment in India," IDB Publications (Working Papers) 7862, Inter-American Development Bank.
    4. repec:eee:jeeman:v:86:y:2017:i:c:p:160-192 is not listed on IDEAS
    5. repec:aea:jecper:v:31:y:2017:i:4:p:73-102 is not listed on IDEAS
    6. Grimm, Michael & Lenz, Luciane & Peters, Jörg & Sievert, Maximiliane, 2016. "Demand for Off-Grid Solar Electricity: Experimental Evidence from Rwanda," IZA Discussion Papers 10427, Institute for the Study of Labor (IZA).
    7. ITO Koichiro & ZHANG Shuang, 2016. "Willingness to Pay for Clean Air: Evidence from the air purifier markets in China," Discussion papers 16074, Research Institute of Economy, Trade and Industry (RIETI).
    8. Vivian Hoffmann & Jacob R. Fooks & Kent D. Messer, 2014. "Measuring and Mitigating HIV Stigma: A Framed Field Experiment," Economic Development and Cultural Change, University of Chicago Press, vol. 62(4), pages 701-726.
    9. B. Kelsey Jack & Paulina Oliva & Christopher Severen & Elizabeth Walker & Samuel Bell, 2015. "Technology Adoption Under Uncertainty: Take-Up and Subsequent Investment in Zambia," NBER Working Papers 21414, National Bureau of Economic Research, Inc.
    10. Katherine P. Adams & Travis J. Lybbert & Stephen A. Vosti & Emmanuel Ayifah, 2016. "Using an economic experiment to estimate willingness-to-pay for a new maternal nutrient supplement in Ghana," Agricultural Economics, International Association of Agricultural Economists, vol. 47(5), pages 581-595, September.
    11. repec:eee:jeeman:v:86:y:2017:i:c:p:121-140 is not listed on IDEAS
    12. Koichiro Ito & Shuang Zhang, 2016. "Willingness to Pay for Clean Air: Evidence from Air Purifier Markets in China," NBER Working Papers 22367, National Bureau of Economic Research, Inc.
    13. Abhijit Banerjee & Rukmini Banerji & James Berry & Esther Duflo & Harini Kannan & Shobhini Mukerji & Marc Shotland & Michael Walton, 2017. "From Proof of Concept to Scalable Policies: Challenges and Solutions, with an Application," Journal of Economic Perspectives, American Economic Association, vol. 31(4), pages 73-102, Fall.
    14. Bridget Hoffmann, 2016. "Do Non-Monetary Prices Target the Poor?: Evidence from a Field Experiment in India," IDB Publications (Working Papers) 95977, Inter-American Development Bank.
    15. Czura, Kristina & Dequiedt, Vianney, 2015. "Willingness-to-pay for microinsurance and flexibility: Evidence from an agricultural investment lab-in-the-field experiment in Senegal," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112993, Verein für Socialpolitik / German Economic Association.
    16. Abhijit Banerjee & Rukmini Banerji & James Berry & Esther Duflo & Harini Kannan, 2016. "From Proof of Concept to Scalable Policies: Challenges and Solutions, with an Application," Working Papers id:11516, eSocialSciences.
    17. Juan Ortner & Sylvain Chassang, 2014. "Making Collusion Hard: Asymmetric Information as a Counter-Corruption Measure," Working Papers 064-2014, Princeton University, Department of Economics, Econometric Research Program..
    18. Raymond P. Guiteras & B. Kelsey Jack, 2014. "Incentives, Selection and Productivity in Labor Markets: Evidence from Rural Malawi," NBER Working Papers 19825, National Bureau of Economic Research, Inc.
    19. Bensch, Gunther & Peters, Jörg, 2017. "One-off subsidies and long-run adoption: Experimental evidence on improved cooking stoves in Senegal," Ruhr Economic Papers 685, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    20. B. Kelsey Jack, 2013. "Private Information and the Allocation of Land Use Subsidies in Malawi," American Economic Journal: Applied Economics, American Economic Association, vol. 5(3), pages 113-135, July.
    21. Michael Greenstone & B. Kelsey Jack, 2013. "Envirodevonomics: A Research Agenda for a Young Field," NBER Working Papers 19426, National Bureau of Economic Research, Inc.
    22. Pascaline Dupas & Edward Miguel, 2016. "Impacts and Determinants of Health Levels in Low-Income Countries," NBER Working Papers 22235, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    field experiments; health behavior; heterogeneous treatment effects; price mechanism;

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • 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; Social Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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