Class 8 - Short Run Subsidies (Dupas,2014) Flashcards
What is the main goal of the paper?
To find out if subsidies in the short run have a long term impact on use of health products such as antimalarial bed nets.
Why might there be positive effects of the short term subsidy on use in the long term?
The subsidy may incentivize someone to use the product that wouldn’t have before and if they enjoy the experience they may by the product again at full price.
If they tell people about their positive experience this may convince others to get the product too.
Why might there be negative effects of the short term subsidy on use in the long term (people not using the product)?
People may not use the product.
If someone is unwilling to spend the monetary cost on a product they may be unwilling to spend the non-monetary cost. e.g. the time it takes to use the product.
Not having to pay for the product reduces sunk costs so people are less likely to feel the need to use the product as they’re not wasting much money if they don’t.
Why might there be negative effects of the short term subsidy on use in the long term (even if people are using the product)?
People’s previously encountered prices may affect their reservation price. So even if they use the product and like it when its subsidised, they may be only willing to pay around the subsidised price.
What health product was studied in the paper?
Long-lasting insecticide Treated Net, which is more comfortable than the traditional net.
What were the two phases of the experiment?
Phase 1 had households be randomly assigned a subsidised price for the LLIN ranging from $0 to $3.80. (100% to 40%) They had 3 months to use the subsidy.
In phase 2 a year later people had the chance to buy the LLIN but everyone faced the same price of $2.30. Also, LLIN was not available outside of the experiment but the tradition nets were available for $1.50
What was the empirical strategy?
It was a randomized control trial .
A school list was looked at to create a list of households with children. From this list the households were randomly assigned different levels of subsidy.
What were the main results of the first phase.
The larger the subsidy was (so the lower the price) the more people bought the net.
However, for those that bought the LLIN usage of the net did not rise as price rose
