The More Choice, the Better? Evidence from Experimental Auctions in Rural Senegal
17 Pages Posted: 7 Jul 2021
Date Written: June 30, 2021
Economists generally believe that more choice is beneficial, yet bigger choice sets can impose opportunity, error and cognitive costs that lower demand. We study this relationship in the context of rural energy use in low-income settings. We invited approximately 1,100 randomly selected Senegalese households to participate in second-price auctions for improved cookstoves, and exogenously varied the number and types of devices being auctioned to identify the causal impact of expanded choice on willingness to pay (WTP). Expanded choice lowered WTP for a more advanced but relatively unfamiliar cookstove by 25 percent, but had no effect on WTP for a simpler, locally-produced device. Households’ ability to compare alternatives side-by-side during multi device auctions and identify the one best suited to their needs appears to drivethese results. Our findings have implications for the design of policies that aim to introduce welfare-improving technologies in remote, rural areas.
Keywords: choice overload, willingness to pay, improved cookstoves, vickrey auction
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