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Abstract:

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Development Discussion Paper
Eliciting and Utilizing Willingness-to-pay: Evidence from Field Trials in Northern Ghana
James Berry, Greg Fischer and Raymond Guiteras May 2018
Paper No' EOPP 066:
Full Paper (pdf)

JEL Classification: C26; C93; D12; L11; L31; O12; Q51


Tags: price mechanism; heterogeneous treatment effects; health behaviour; becker-degroot-marschak; field experiments

Using the Becker-DeGroot-Marschak (BDM) mechanism, we estimate the willingness-to-pay (WTP) for and impact of clean water technology through a field experiment in Ghana. Although WTP is low relative to the cost, demand is relatively inelastic at low prices. In the short-run, treatment effects are positive—the incidence of children’s diarrhea falls by one third—and consistent throughout the WTP distribution. After a year, usage has fallen, particularly for those with relatively low valuations. Strikingly, the long-run average treatment effect is negative for those with valuations below the median. Combining estimated treatment effects with individual willingness-to pay measures implies households’ valuations of health benefits are much smaller than those typically used by policymakers. Finally, we explore differences between BDM and take-it-or-leave-it valuations and make recommendations for effectively implementing BDM in the field.