Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana

43 Pages Posted: 13 Jul 2015

See all articles by James Berry

James Berry

Cornell University - Department of Economics

Greg Fischer

London School of Economics & Political Science (LSE) - Department of Economics

Raymond P. Guiteras

University of Maryland - Department of Economics

Date Written: July 2015

Abstract

We demonstrate the benefits and feasibility of using the Becker-DeGroot-Marschak (BDM) mechanism to elicit precise, individual-level willingness to pay and thereby enhance the information generated by randomized experiments. With a relatively small sample and minor modifications to a standard field experiment design, we can directly estimate demand, study the effect of prices on usage through screening and psychological (sunk-cost) effects, and compute heterogeneous marginal treatment effects. Applying the mechanism to a field experiment studying clean drinking water technology in northern Ghana, we show that even in an environment with low literacy and numeracy, BDM produces sensible results. We find that although willingness to pay for clean water technology is low relative to the cost, demand is surprisingly inelastic at low prices; prices do not generate significant sunk-cost effects; and treatment effects are heterogeneous with respect to valuation and consistent with outcomes being affected by effort expenditure.

Keywords: field experiments, health behavior, heterogeneous treatment effects, price mechanism

JEL Classification: C26, C93, D12, L11, L31, O12, Q51

Suggested Citation

Berry, James and Fischer, Greg and Guiteras, Raymond P., Eliciting and Utilizing Willingness to Pay: Evidence from Field Trials in Northern Ghana (July 2015). CEPR Discussion Paper No. DP10703, Available at SSRN: https://ssrn.com/abstract=2630151

James Berry (Contact Author)

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Greg Fischer

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Raymond P. Guiteras

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

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