 Decision costs and price sensitivity: Field experimental evidence from IndiaJournal of Economic Behavior & Organization, 2014, vol. 97, issue C, 169-184 Abstract: Poor people often exhibit puzzlingly high sensitivity to low prices of important consumer health goods. This paper proposes decision costs as one explanation: whether a person buys at a price depends on whether she carefully considers the offer, which itself depends on price. A simple model predicts that deliberation costs (1) increase sensitivity to low prices; (2) can prevent cost-sharing from targeting products to buyers with high value; and (3) can have larger effects on poorer people. The principal contribution of this paper is a field experiment that sold hand-washing soap in rural India. Participants were randomly assigned to be offered soap for either a low or very low price, which was experimentally crossed with assignment to a control group or to a treatment that required deliberation. Results matched predictions of the model: the treatment decreased price sensitivity relative to the control group, and increased targeting of product take-up by need. Keywords: Deliberation costs; Cognitive limits; Social marketing; Cost sharing; Handwashing with soap; Pricing; Behavioral economics; Development economics; Field experiment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:97:y:2014:i:c:p:169-184 DOI: 10.1016/j.jebo.2013.06.012 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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