Center for Behavioral Decision Research

CBDR : Seminar Series : Seminar by Nava Ashraf

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

	presented by Nava Ashraf (Harvard Business School)


	Thursday, December 6	link to paper
	Noon-1:15
	Porter 223D	link to Speaker's Site

	Abstract:

	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.

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