Working Paper: CEPR ID: DP9999
Authors: Greg Fischer; Dean S. Karlan; Margaret McConnell; Pia Raffler
Abstract: In a field experiment in Uganda, a free distribution of three health products lowers subsequent demand relative to a sale distribution. This contrasts with work on insecticide-treated bed nets, highlighting the importance of product characteristics in determining pricing policy. We put forward a model to illustrate the potential tension between two of these important factors, learning and anchoring, and then test this model with three products selected specifically for their variation in the scope for learning. We find the rank order of percentage change of shifts in demand matches theoretical predictions, although the differences are not statistically significant, and only two of three pairwise comparisons match when the reductions are specified in percent terms. These results highlight the importance of understanding pricing policy with respect to product, market, and household characteristics.
Keywords: health; learning; pricing; subsidies
JEL Codes: D11; D12; D83; I11; I18; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| negative anchoring effect of prior free distribution (D39) | future demand (J23) |
| learning effects associated with products (L15) | future demand (J23) |
| free distribution (D39) | future demand (J23) |
| free distribution (D39) | likelihood of repurchase for Panadol (D18) |
| free distribution (D39) | likelihood of repurchase for Elyzole (M31) |
| free distribution (D39) | demand for Zinkid (R22) |