Lecture 8- Free Distribution or Cost-Sharing, Evidence from a Randomized Malaria Prevention Experiment (2010, Cohen and Dupas) Flashcards
Who wrote Free Distribution or Cost-Sharing, Evidence from a Randomized Malaria Prevention Experiment
Cohen and Dupas in 2010
What is cost-sharing
Charging a price for a product (above 0), it can even be subsidized
Why do some believe cost-sharing in health products is necessary?
So people value the product and do not waste it (they believe this is more likely to happen then if it was free.
What are the possible positive effects of cost- sharing?
Selection effect- deselects people who do not value the good enough to pay for it and are less likely to use it anyways. Instead people that value it will pay for it (and use it).
Information effect- A higher price signals that the good is more important and encourages usage.
Psychological effect- People are more likely to use goods that they spend money on.
What are the possible negative effects of cost- sharing?
Higher price means lower demand
Selection effect can go the opposite way, if people that can’t afford to pay for a health product also have higher levels of illness, cost-sharing will screen out the people that actually need the product.
What is an ITN
Insecticide- Treated Net
Have shown to reduce child mortality by 20% in areas of Africa where Malaria is the main cause of death in under 5s
However they are unaffordable to most people.
Explain the experiment and Part 1 of the Randomization Process
A Field experiment was conducted across 4 districts in Kenya where Malaria is Endemic.
20 clinics took part, 4 were the control (no change in ITN prices here)
In 16 clinics there was a randomization as to the degree of subsidy they could price on ITNS going from 0 Kenyan Shillings (free) to 40 KSh (90% subsidy)
What was done in Part 1 of the Randomization process to see if women who need the ITN the most are willing to pay more for it?(selection effect)
During the prenatal visit they measured haemoglobin levels (to see if low), which are important to indicate if there is anaemia in pregnancy, which is an important predictor of malaria in pregnancy.
They also visited women in their houses to see if they had up the bed nets and were using them
Explain the Part 2 of the Randomization Process
Women that were willing to pay a positive price were surprised and offered the chance to instead pay a cheaper price by taking part in a lottery. The different potential outcomes of the lottery were:
Free
Cheaper Price than initial price
Price kept the same as initial price
How does the lottery in Part 2 of the Randomization Process delete the selection effect
Women couldn’t choose to participate in the lottery to get a cheaper price , they were surprised and all women offered a lottery accepted it.
The selection effect is deleted in Part 2 and only psychological effects have an impact
SLIDE 33
Was there evidence to show that paying a higher price for nets induced a psychological effect of sunk costs?
The results for sunk costs were not statistically significant so there is no evidence of a psychological effect inreasing peoples’s usage of nets to avoid wasting money.
Were there selection effects?
No evidence of women with lower haemoglobin levels (anemia and so higher risk of malaria) having higher purchase of nets even if price paid is higher
