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American Economic Review: Vol. 100 No. 5 (December 2010)

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

Article Citation

Ashraf, Nava, James Berry, and Jesse M. Shapiro. 2010. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia." American Economic Review, 100(5): 2383-2413.

DOI: 10.1257/aer.100.5.2383

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. (JEL C93, D12, I11, M31, O12)

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Authors

Ashraf, Nava (Harvard U)
Berry, James (Cornell U)
Shapiro, Jesse M. (U Chicago)

JEL Classifications

C93: Field Experiments
D12: Consumer Economics: Empirical Analysis
I11: Analysis of Health Care Markets
M31: Marketing
O12: Microeconomic Analyses of Economic Development


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