London School of Economics EOPP: Economic Organisation and Public Policy Programme LSE
EOPP: Economic Organisation and Public Policy Programme

Abstract for:

Eliciting and Utilizing Willingness-to-pay: Evidence from Field Trials in Northern Ghana

James Berry, Greg Fischer, Raymond Guiteras, May 2018
Paper No' EOPP 066: | Full paper (pdf)
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Keywords: price mechanism, heterogeneous treatment effects, health behaviour, Becker-DeGroot-Marschak, field experiments

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

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: Economic Organisation and Public Policy Discussion Papers
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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.