Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia
55 Pages Posted: 13 Jul 2007 Last revised: 13 Sep 2010
Date Written: July 2007
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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