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

Nava Ashraf, James Berry and Jesse Shapiro

American Economic Review, 2010, vol. 100, issue 5, 2383-2413

Abstract: The controversy over 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 evidence of economically important screening effects. By contrast, we find no consistent evidence of sunk-cost effects. (JEL C93, D12, I11, M31, O12)

Date: 2010
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Working Paper: Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia (2007)
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