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

55 Pages Posted: 13 Jul 2007 Last revised: 13 Sep 2010

See all articles by Nava Ashraf

Nava Ashraf

Harvard Business School

James N. Berry

affiliation not provided to SSRN

Jesse M. Shapiro

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2007

Abstract

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.

Suggested Citation

Ashraf, Nava and Berry, James N. and Shapiro, Jesse M., Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia (July 2007). NBER Working Paper No. w13247. Available at SSRN: https://ssrn.com/abstract=1000351

Nava Ashraf (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-495-5058 (Phone)
617-496-4191 (Fax)

James N. Berry

affiliation not provided to SSRN ( email )

No Address Available

Jesse M. Shapiro

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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