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

James Berry, Greg Fischer and Raymond P. Guiteras

Journal of Political Economy, 128(4), April 2020, doi:10.1086/705374. PDF

Abstract: 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.

Final pre-publication draft: CEnREP Working Paper No. 18-016, May 2018, https://go.ncsu.edu/cenrep-wp-18-016. PDF

Dataverse site (Appendices; sales scripts; replication code and data): doi.org/10.7910/DVN/RAOYMQ

Direct link to replication code and data: https://go.ncsu.edu/rpguiter.ghana-bdm.replication