Demand Estimation with Strategic Complementarities: Sanitation in Bangladesh

65 Pages Posted: 4 Feb 2019 Last revised: 11 Feb 2019

See all articles by Raymond Guiteras

Raymond Guiteras

University of Maryland

James Levinsohn

Yale University - Cowles Foundation

Ahmed Mushfiq Mobarak

Yale School of Management; Yale University - Cowles Foundation

Date Written: January 2019

Abstract

For many products, the utility of adoption depends on the share of other households that adopt. We estimate a structural model of demand that allows for these inter-dependencies. We apply our model to the adoption of household latrines - a technology that has large consequences for public health. We estimate the model using data from a large-scale experiment covering over 18,000 households in 380 communities in rural Bangladesh, where we randomly assigned incentives to purchase latrines. Subsidies were randomly assigned at the household level to identify the direct effect of price, and subsidy saturation was randomly varied at the community level to identify strategic complementarities in demand. We conduct counter-factual simulations to analyze the policymaker's tradeoffs along price, saturation and scope margins: To raise aggregate latrine adoption, is it better to intensely subsidize a few, or widely disperse subsidies across households or communities? We also analyze the effects of targeting subsidies on the basis of household poverty, social position, or neighborhood population density. Finally, we use additional experiments to explore mechanisms underlying the complementarity in demand, and find that shame and changing social norms are driving factors.

Suggested Citation

Guiteras, Raymond and Levinsohn, James and Mobarak, Ahmed Mushfiq, Demand Estimation with Strategic Complementarities: Sanitation in Bangladesh (January 2019). CEPR Discussion Paper No. DP13498. Available at SSRN: https://ssrn.com/abstract=3328509

Raymond Guiteras (Contact Author)

University of Maryland

College Park
College Park, MD 20742
United States

James Levinsohn

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Ahmed Mushfiq Mobarak

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5787 (Phone)

HOME PAGE: http://mba.yale.edu/faculty/profiles/mobarak.shtml

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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