TY  - JOUR
AU  - Dupas,Pascaline
TI  - Short-Run Subsidies and Long-Run Adoption of New Health Products: Evidence from a Field Experiment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16298
PY  - 2010
Y2  - August 2010
UR  - http://www.nber.org/papers/w16298
L1  - http://www.nber.org/papers/w16298.pdf
N1  - Author contact info:
Pascaline Dupas
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305-6072
E-Mail: pdupas@stanford.edu
AB  - Short-run subsidies for health products are common in poor countries. How do they affect long-run adoption? We present a model of technology adoption in which people learn about a technology's effectiveness by using it (or observing others using it) for some time, but people quit using it too early if they face higher-than-expected usage costs (e.g., side effects). The extent to which one-off subsidies increase experimentation, and thereby affect learning and long-run adoption, then depends on people's priors on these usage costs. One-off subsidies can also affect long-run adoption through reference-dependence: People might anchor around the subsidized price and be unwilling to pay more for the product later. We estimate these effects in a two-stage randomized field experiment in Kenya. We find that, for a new technology with a lower usage cost than the technology it replaces, short-run subsidies increase long-run adoption through experience and social learning effects. We find no evidence that people anchor around subsidized prices.
ER  -