Article | American Economic Review | December 2010

Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia

by Nava Ashraf, James Berry and Jesse M. Shapiro

Abstract

The controversy over how much to charge for health products in the developing world rests, in part, on whether higher prices can increase use, either by targeting distribution to high-use households (a screening effect), or by stimulating use psychologically through a sunk-cost effect. We develop a methodology for separating these two effects. We implement the methodology in a field experiment in Zambia using door-to-door marketing of a home water purification solution. We find evidence of economically important screening effects. By contrast, we find no consistent evidence of sunk-cost effects.

Keywords: Price; Product; Information; Zambia;

Citation:

Ashraf, Nava, James Berry, and Jesse M. Shapiro. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia." American Economic Review 100, no. 5 (December 2010): 2383–2413. (Online Appendix.)