Signaling, screening, or sunk costs? Experimental evidence on how prices affect agricultural technology adoption in East Africa

Bjorn Van Campenhout, Gashaw T. Abate, Liesbeth Colen and Berber Kramer

No 2369, IFPRI discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: Free samples are a widely used strategy to introduce new products or technologies, offering prospective users the opportunity to gain firsthand experience and potentially facilitate diffusion through social networks. However, concerns remain that giving away products for free may reduce their perceived value, increasing the risk that recipients will underutilize, repurpose, or resell the product rather than use it for its intended purpose. We explore three mechanisms through which charging a positive price may increase uptake, intended use and subsequent adoption of a new technology: (1) a signaling effect, where a positive price conveys higher product quality; (2) a screening effect, whereby payment deters users who do not value the product and targets those more likely to use it; and (3) a sunk cost effect, where paying a positive price induces a psychological commitment to use. We test how these pricing mechanisms shape uptake, use, and subsequent adoption of recently released seed varieties of staple food crops, drawing on a field experiment with smallholder farmers in Uganda and Ethiopia. We find that willingness to pay is a reliable predictor of subsequent use of seed trial packs, pointing to the value of modest prices for targeting likely adopters. At the same time, sunk cost effects are context specific and often negative, suggesting that charging farmers can reduce their ability or willingness to experiment. These findings carry important implications for how pricing strategies can be designed to promote technology adoption in low-income settings.

Keywords: technology adoption; prices; crops; seeds; costs; agricultural technology; Uganda; Ethiopia; Africa; Eastern Africa; Sub-Saharan Africa (search for similar items in EconPapers)
Date: 2025-10-24
New Economics Papers: this item is included in nep-dcm and nep-exp
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