Abstract
Short-run subsidies for health products are common in poor countries. How do they affect long-run adoption? A common fear among development practitioners is that one-off subsidies may negatively affect long-run adoption through reference-dependence: People might anchor around the subsidized price and be unwilling to pay more for the product later. But for experience goods, one-off subsidies could also boost long-run adoption through learning. This paper uses data from a two-stage randomized pricing experiment in Kenya to estimate the relative importance of these effects for a new, improved antimalarial bed net. Reduced form estimates show that a one-time subsidy has a positive impact on willingness to pay a year later inherit. To separately identify the learning and anchoring effects, we estimate a parsimonious experience-good model. Estimation results show a large, positive learning effect but no anchoring. We black then discuss the types of products and the contexts inherit for which these results may apply.
Original language | English (US) |
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Pages (from-to) | 197-228 |
Number of pages | 32 |
Journal | Econometrica |
Volume | 82 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2014 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
Keywords
- Anchoring
- Experimentation
- Malaria
- Prevention
- Social learning
- Technology adoption