Working Paper: CEPR ID: DP10703
Authors: James Berry; Greg Fischer; Raymond P. Guiteras
Abstract: We demonstrate the benefits and feasibility of using the Becker-DeGroot-Marschak (BDM) mechanism to elicit precise, individual-level willingness to pay and thereby enhance the information generated by randomized experiments. With a relatively small sample and minor modifications to a standard field experiment design, we can directly estimate demand, study the effect of prices on usage through screening and psychological (sunk-cost) effects, and compute heterogeneous marginal treatment effects. Applying the mechanism to a field experiment studying clean drinking water technology in northern Ghana, we show that even in an environment with low literacy and numeracy, BDM produces sensible results. We find that although willingness to pay for clean water technology is low relative to the cost, demand is surprisingly inelastic at low prices; prices do not generate significant sunk-cost effects; and treatment effects are heterogeneous with respect to valuation and consistent with outcomes being affected by effort expenditure.
Keywords: field experiments; health; behavior; heterogeneous treatment effects; price mechanism
JEL Codes: C26; C93; D12; L11; L31; O12; Q51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| BDM mechanism (C69) | willingness to pay (D11) |
| price (D41) | water filter usage (Q25) |
| treatment effects (C22) | reduction in diarrhea among children (J13) |
| willingness to pay (D11) | water filter usage (Q25) |
| willingness to pay (D11) | treatment effects (C22) |