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

Last registered on March 21, 2016
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Pre-Trial

Trial Information

General Information

Title
Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia
RCT ID
AEARCTR-0001125
Initial registration date
March 21, 2016

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
March 21, 2016, 10:57 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Zambia
Region
Africa

Primary Investigator

Name
James Berry
Affiliation
Cornell University
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Other Primary Investigator(s)

PI Name
Jesse M. Shapiro
PI Affiliation
University of Chicago Booth School of Business
Contact Investigator
PI Name
Nava Ashraf
PI Affiliation
Harvard Business School
Contact Investigator

Additional Trial Information

Status
Completed
Start date
2006-05-01
End date
2006-08-01
Keywords
Health
Additional Keywords
drinking water, chlorination, Clorin, disinfectant, discount, price elasticity, sunk-cost effect, screening effect, willingness to pay, water purification, Zambia
JEL code(s)
C93, D12, I11, M31, O12
Secondary IDs
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.
External Link(s)
J-PAL Evaluation summary

Registration Citation

Citation
Ashraf, Nava, James Berry and Jesse M. Shapiro. 2016. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia." AEA RCT Registry. March 21. https://doi.org/10.1257/rct.1125-1.0
Former Citation
Ashraf, Nava, James Berry and Jesse M. Shapiro. 2016. "Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia." AEA RCT Registry. March 21. https://www.socialscienceregistry.org/trials/1125/history/7353
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
The intervention was a door-to-door sale of Clorin, a solution of sodium hypochlorite for disinfecting drinking water, to about 1,000 households in Lusaka, Zambia.

Stage one: Each participating household was offered a single bottle of Clorin for a one-time only, randomly chosen OFFER PRICE, which was above zero and at or below the prevailing retail price. This allowed the researchers to understand whether households with a higher willingness to pay were more likely to purchase the product (screening effect).

Stage two: Households that agreed to purchase at the offer price received an unanticipated, randomly chosen discount, thus varying the TRANSACTION PRICE separately from the offer price. This allowed researchers to estimate whether a higher transaction price results in greater use in drinking water.
Intervention (Hidden)
Intervention Start Date
2006-05-01
Intervention End Date
2006-07-01

Primary Outcomes

Primary Outcomes (end points)
Use of Clorin in household drinking water
Primary Outcomes (explanation)
The primary survey measure of Clorin use is the household’s (yes or no) response to whether its stored drinking water is currently treated with Clorin. In addition, the surveyor tests the household’s drinking water with a Sensafe Waterworks 2 test strip which changes color based on chlorine concentration. The strip tests for both free and total chlorine, but the former was chosen as it is less sensitive to variation in test conditions (such as light and heat).

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The experiment was conducted in low-income peri urban areas called “compounds” from which 1,260 households were selected at baseline by stratified random sampling (by “compounds”). Female head of households were surveyed for the entire experiment because they are responsible for drinking water. Marketers offered to sell a single bottle of Clorin for a one-time-only price. This initial offer price was chosen randomly, with 10 percent of households receiving an offer price of 800 Kw – the actual market prices of Clorin - and the remaining 90 percent split as evenly as possible among offer prices of 300, 400, 500, 600, and 700 Kw. The offer prices were allocated randomly. If the respondent agreed to buy at the initial offer price, the respondent was given a sealed envelope, which contained a coupon offering a one-time discounted price on the bottle of Clorin ranging fom 0Kw to 700Kw. Using a sealed envelope allowed researchers to control the amount of the discount, and to prevent the marketer from signaling the discount using body language or other cues. After the respondent opened the envelope, the respondent paid for the bottle of Clorin, wrote the amount of the transaction price on a receipt, and signed it.
Experimental Design Details
Randomization Method
Done using Stata.
Randomization Unit
Households
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
1,260 households
Sample size: planned number of observations
1,260 households
Sample size (or number of clusters) by treatment arms
The following arms refer to [offer price; transaction price 1, transaction price 3..., Total]

300 Kw; 0Kw, 100 Kw, 200 Kw: 90, 67 69. Total: 227.
400 Kw; 0Kw, 100 Kw, 200 Kw, 300 Kw: 90, 45, 46, 46. Total: 227.
500 Kw; 0Kw, 100 Kw, 200 Kw, 300 Kw, 400 Kw: 90, 34, 34, 34, 35. Total: 227.
600 Kw; 0Kw, 100 Kw, 200 Kw, 300 Kw, 400 Kw, 500 Kw: 90, 27, 27, 28, 27, 28.Total: 227.
700 Kw; 0Kw, 100 Kw, 200 Kw, 300 Kw, 400 Kw, 500 Kw, 600 Kw: 90, 22, 23, 23, 23, 23, 23. Total: 227..
800 Kw; 0Kw, 100 Kw, 200 Kw, 300 Kw, 400 Kw, 500 Kw, 600 Kw, 700 Kw: 50, 10, 11, 11, 11, 11, 11, 11. Total: 126..
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials

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IRB

Institutional Review Boards (IRBs)

IRB Name
Harvard University Committee on the Use of Human Subjects in Research
IRB Approval Date
2006-02-14
IRB Approval Number
N/A
IRB Name
University of Chicago Social and Behavioral Sciences Institutional Review Board
IRB Approval Date
2006-06-01
IRB Approval Number
H06039
IRB Name
University of Zambia Research Ethics Committee
IRB Approval Date
2006-05-02
IRB Approval Number
001-03-06
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
July 01, 2006, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
August 01, 2006, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
1004 households
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
1004 households
Final Sample Size (or Number of Clusters) by Treatment Arms
Data Publication

Data Publication

Is public data available?
Yes
Public Data URL
https://www.aeaweb.org/aer/data/dec2010/20080857_data.zip

Program Files

Program Files
Yes
Program Files URL
https://www.aeaweb.org/aer/data/dec2010/20080857_data.zip
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
CAN HIGHER PRICES STIMULATE PRODUCT USE? EVIDENCE FROM A FIELD EXPERIMENT IN ZAMBIA

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.
Citation
Ashraf, Nava, James Berry, and Jesse M. Shapiro. 2010. ""Can Higher Prices Stimulate Product Use? Evidence from a Field Experiment in Zambia."" American Economic Review 100: 2383-2413.
URL
https://www.povertyactionlab.org/sites/default/files/publications/214%20Pricing%20Zambia%20Dec%2010.pdf

Reports & Other Materials