To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda

Greg Fischer (), Dean Karlan, Margaret McConnell () and Pia Raffler ()
Additional contact information
Greg Fischer: London School of Economics
Margaret McConnell: Harvard University
Pia Raffler: Yale University

Working Papers from Economic Growth Center, Yale University

Abstract: Pricing policy for any experience good faces a key tradeoff. On the one hand, a price reduction increases immediate demand and hence more people learn about the product. On the other hand, lower prices may serve as price anchors and, through a comparison effect, decrease subsequent demand. This tension is particularly important for the distribution of health products in low-income countries, where free or heavily subsidized distribution is a common but controversial practice. Based on a model combining the learning aspect of experience goods with reference-dependent preferences, we set up a field experiment in Northern Uganda in which three health products differing in their scope for learning were initially offered either for free or for sale at market prices. In line with prior studies, when the product has potential for positive learning, we do not find an effect of free distribution on future demand. However, for products without scope for positive learning, we find evidence of price anchors: future demand is lower after a free distribution than after a distribution at market prices.

Keywords: subsidies; health; pricing; learning (search for similar items in EconPapers)
JEL-codes: D11 D12 D83 I11 I18 O12 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2014-05
New Economics Papers: this item is included in nep-afr, nep-dem, nep-exp and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Working Paper: To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda (2014)
Working Paper: To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda (2014)
Working Paper: To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda (2014)
Working Paper: To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda (2014)
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