This research consists of a field experiment in the market for group-based, after-school tutoring services in India.
The sample for this study consists of approximately 5400 children in 4400 households in in the neighborhoods of Pratham’s 21 tuition centers.
Households are offered tutoring services at prices ranging from 0 to 250 rupees per month. We implement a two-part pricing design similar to those in the health literature (Cohen and Dupas, 2010; Ashraf, Berry and Shapiro, 2010). Households are first offered tutoring services for their children at randomly assigned prices (the “offer price”). Then, if a household accepts that price, the household receives a randomly assigned discount of up to the amount of the offer price (resulting in a lower price paid, the “second price”). This way, the selection effect of prices can be isolated by examining the composition (and behavior) of households that purchase the services at different offer prices conditional on the second price. The psychological effect can be isolated by examining the behavior of households that have paid different prices, conditional on the offer price.