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Does payment type affect willingness-to-pay? Valuing new seed varieties in India

Fiona Hossack and Henry An

Environment and Development Economics, 2015, vol. 20, issue 3, 407-423

Abstract: Cash is often used in economic experiments as an incentive to encourage realistic decision making or to compensate participants for their time. However, in many less developed countries, remunerating participants with cash can upset existing relationships with local institutions. In cases where the use of cash is not feasible, an alternative type of payment is required. Using a framed field experiment in Odisha, India (formerly Orissa), we explore an alternative payment method, in-kind, where typical household items are used in place of cash. We compare the differences in the valuation of yield stabilizing seed traits between in-kind and cash. Our results suggest that farmers are willing to pay less for seeds when they are paid cash than when they are paid in-kind. Bids are higher by 1.18 Indian Rupees when farmers are paid in-kind, corresponding to about a 7 per cent higher valuation.

Date: 2015
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Handle: RePEc:cup:endeec:v:20:y:2015:i:03:p:407-423_00