Ruhr Economic Papers

Ruhr Economic Papers #685

One-off Subsidies and Long-Run Adoption – Experimental Evidence on Improved Cooking Stoves in Senegal

by Gunther Bensch and Jörg Peters

RWI, 04/2017, 39 S./p., 8 Euro, ISBN 978-3-86788-795-3 DOI: 10.4419/86788795

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Abstract

Free distribution of a technology can be an effective development policy instrument if its adoption is socially inefficient and hampered by affordability constraints. Improved cookstoves may be such a case: they generate high environmental and public health returns, but adoption is generally low. Based on a randomized controlled trial in rural Senegal, this paper studies whether one-time free cookstove distribution affects households’ willingness to pay (WTP) in the long run. Effects might be negative because people anchor their WTP on the earlier zero price (reference dependence) or positive because information deficits about potential benefits are overcome. We find that households who received a free stove six years back exhibit a higher WTP today compared to control households. Potential reference dependence effects are thus at least compensated by learning effects. Our findings suggest that one-time free distribution does not spoil future prices and might even be a stepping stone for future market establishment.

JEL-Classification: D03, D12, O12, O13

Keywords: Technology adoption; cookstoves; willingness to pay; real-purchase offer; energy access

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