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.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13247.; Working paper series (National Bureau of Economic Research) -- working paper no. 13247.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Number of pages: 60
Subjects: Health products -- Prices -- Zambia; Health products -- Zambia -- Usage -- Econometric models; Water -- Purification -- Economic aspects -- Zambia; Water -- Purification -- Economic aspects -- Developing countries
Description: The controversy over whether and how much to charge for health products in the developing world rests, in part, on whether higher prices can increase use. We test this hypothesis in a field experiment in Zambia using door-to-door marketing of a home water purification solution. Our methodology separates the screening effect of prices (charging more changes the mix of buyers) from the psychological effect of prices (charging more stimulates greater use for a given buyer). We find that higher prices screen out those who use the product less. The amount paid does not have a psychological effect on use, but there is some evidence that the act of paying increases use. We use our data to estimate an economic model of product use, simulate counterfactuals, and develop tentative implications for pricing policy.
Notes: "July 2007."

Includes bibliographical references (p. 34-38).

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