Experimental Design
The project will use rice soil test kits (PUTS) which were developed by the Indonesian Soil Research Institute (a department of the Ministry of Agriculture). The soil test kits have been extensively tested and validated. One soil test kit comprises materials to conduct 50 soil tests.
To elicit farmers’ willingness to pay for soil testing we will use an incentive-compatible auction mechanism, based on the Becker-DeGroot-Marschak (BDM) approach. Using the BDM approach, participants make a private price bid to purchase a product. This private price bid will not be shared with the other farmers or anybody else outside the research team. The private price bid is subsequently compared to a randomly drawn price. In the context of our study, we decided to make the price draw public to increase transparency. Participants can only purchase the soil test if their bid is at or above the randomly drawn price. Successful bidders pay the price drawn, not the price of their bid. Unlike other approaches, the BDM approach uses an incentivized measure to reveal participants’ preferences. If participants overstate their real willingness to pay, they might have to buy the product at a higher price than their actual valuation. If they understate their willingness to pay, they might miss the opportunity to purchase the product at a price equal to or lower than their actual valuation.
Before the bidding process, participants will be invited to an information session. During the information session, participants will receive an introduction to the soil test kit PUTS from a trained facilitator and an introduction to the bidding process from a local member of our research team (‘enumerator’ hereafter).
To ensure that participants understand the experiment before they make their bid, enumerators will demonstrate the bidding process in detail using a different product. Enumerators will not influence the participants in their price bidding and especially will not encourage them to increase their bids. If participants decide that for them the soil test has no value at all, they could also make a price bid of zero. Before we proceed to the bidding process, we will seek informed consent from all participants. Participation is voluntary.
We will compare two experimental arms, the WTP Service (WTP-S) and the WTP Collective Good (WTP-CG). We start with a higher share of WTP-CG (60%) as some of these villages will be allocated to the WTP-S group whenever there are not enough potential participants, i.e. contributors for the CG. We set this threshold at 10, i.e. if less than 10 farmers participate, the participants are shifted to the WTP-S experiment. We designed the experimental arms in a way that they cover two possible ways in which the soil tests could be distributed among farmers outside of our experiment, for example by government extension offices.
Treatment 1: Service
In the first treatment arm, we will offer farmers the chance to bid for the service of having their soil tested with a rapid soil test. The soil testing will be performed by a trained facilitator. Farmers will not have to follow training themselves. Instead, they only provide the soil sample and then receive the soil test results and individualized fertilizer recommendations based on their soil test results and plot size. Following their price bid, farmers are asked how many soil samples they would like to get tested if they are successful. The bidding process is private, however, there will only be one price drawn at the village level to avoid that successful farmers pay a different price within the same village.
Treatment 1 resembles the scenario where a public extension worker comes to the village and performs the soil tests for the farmers and the farmers are asked to contribute to the costs of the soil test kit. Farmers will be asked to make a bid for the material cost while the service of performing the soil test will be free.
Treatment 2: Collective Good
In the second treatment arm, farmers are asked to make a bid for their contribution to buy the complete soil test kit as a group. Thus, we will compare whether the sum of all bids made by the participants in one village is equal to or lower than the price that is publicly drawn. If the group is successful, the group receives the soil test kit and a trained facilitator will provide the group with training on how to use the soil test kit.
To account for the fact that some farmers might be less well-endowed and to decrease the pressure, if any, on them to bid more than they really want to pay, we will double the two lowest bids in the group contribution setting (of course keeping it confidential whose bids are doubled). This doubling will act as an additional subsidy. If the group is successful, the participants only pay at the maximum their stated bids while the project carries the doubling of the two lowest (non-zero) bids. If the drawn price is lower than the sum of bids by the group, each participant will pay a share proportional to his/her bid.
Treatment 2 resembles the scenario where a public extension worker trains a group of farmers that have purchased a (subsidized) soil test kit on how to conduct soil tests with this kit.
Sampling procedure:
The willingness-to-pay experiment will be conducted in 46 villages in the province of Yogyakarta, Indonesia. The maximum number of participants per village is 16. These 16 potential participants are part of a different sample that is covered by a survey that the project team is conducting in Indonesia (add link to other PAP). We will invite all 16 participants to join an information session. However, we expect that not all participants will follow the invitation. The expected attendance rate is around 12 farmers per village.
Treatment allocation
Whether farmers in a village participate in WTP-S or WTP-CG will be randomly assigned. This assignment will be stratified by the treatment status of the village in the related project from which the sample of farmers for this experiment is drawn. In half of the villages, farmers were offered a one-day-training on soil fertility management in 2022. The other half of the villages served as control group. This procedure results in a two-by-two setting where half of the farmers in each of the two experimental arms had been exposed to the soil fertility management training.
Data collection
The data collection will encompass the price bid and a very short structured questionnaire. Given that the respondents are surveyed already within another related project, there is no need to collect additional socio-economic data in this project.