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Willingness to pay for a new farm technology given risk preferences: Evidence from an experimental auction in Kenya

Hira Channa, Jacob Ricker‐Gilbert, Hugo De Groote and Jonathan Bauchet

Agricultural Economics, 2021, vol. 52, issue 5, 733-748

Abstract: Smallholder farmers and small‐scale traders who do not have access to moisture measurement tools may not be able to fully observe moisture content in their grain. However, encouraging the adoption of these tools is important for food safety, because growth of dangerous toxins can be prevented by drying grain to 13.5% moisture content or below before storage. Several low‐cost devices have recently been developed that can accurately test moisture content in maize. In this article, we first estimate the demand for two such devices among smallholder farmers and small‐scale traders in Western Kenya. Second, we measure the impact of individuals’ risk aversion on willingness to pay for these devices. Third, we measure framing effects in experimental auctions by eliciting valuations with increasing and decreasing price lists. We found that more than 80% of respondents were willing to pay more than the wholesale price for the cheaper of the two devices. Farmers in our sample, who were growing maize primarily for own consumption, were willing to pay more than traders. Individuals who were more risk‐averse reported a slightly higher willingness‐to‐pay for these risk‐reducing devices. Finally, farmers—but not traders—were sensitive to framing effects: mean bids elicited with a decreasing price list during the auction were 37% higher than those with an increasing price list.

Date: 2021
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Working Paper: Willingness to Pay for a new farm technology given Risk Preferences. Evidence from an experimental auction in Kenya (2018) Downloads
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