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American Economic Review Vol. 100 No. 5 2010

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

Nava Ashraf1; James Berry2; Jesse M. Shapiro3

1 Harvard Business School, Baker Library 443, Boston, MA 02163. · 2 Department of Economics, Cornell University, 486 Uris Hall, Ithaca, NY 14853. · 3 University of Chicago Booth School of Business, 5807 South Woodlawn Avenue, Chicago, IL 60637.

Abstract

The controversy over 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 evidence of economically important screening effects. By contrast, we find no consistent evidence of sunk-cost effects.

DOI
10.1257/aer.100.5.2383
Volume
100
Issue
5
Pages
2383-2413
Language
en
Sources
openalex bibtex:phds-export.bib crossref

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