Can higher prices stimulate product use?
Subtitle: evidence from a field experiment in Zambia
By: Nava Ashraf, James Berry, Jesse M. Shapiro
Contributors: Berry, James; Shapiro, Jesse; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 07-034; Working paper (Harvard Business School. Division of Research) -- 07-034
Publisher: Division of Research, Harvard Business School
Published: 2007
Place of publication: Boston]
Language: eng
Number of pages: 58
Description: The pricing of health products in the developing world has become a center of controversy among policymakers, with important implications for the efficient targeting of social programs more generally. A key issue in this debate is whether higher purchase prices lead to more intensive product use and, therefore, greater health benefits. We present results from an experiment in Lusaka, Zambia, designed to test whether charging more for a home water purification solution results in more use of the product. Our methodology separates the screening effect of prices (charging more changes the mix of buyers) from the causal effect of prices (charging more stimulates greater use for a given buyer). We find that higher prices screen out less intensive users of the product. High prices do not cause greater product use than low prices for a given buyer, but there is some evidence that the act of paying increases use. Our estimates imply that positive prices may be optimal even if maximizing use is the sole objective.
Notes: "October 30, 2006"--Added t.p.

Includes bibliographical references.