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

  • Nava Ashraf
  • James Berry
  • Jesse M. Shapiro

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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Publication status: published as Nava Ashraf & James Berry & Jesse M. Shapiro, 2010. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia," American Economic Review, American Economic Association, vol. 100(5), pages 2383-2413, December.
Handle: RePEc:nbr:nberwo:13247
Note: LS HC
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