Trouble with zero: The limits of subsidizing technology adoption

Pallavi Shukla; Hemant K. Pullabhotla; Kathy Baylis

doi:10.1016/j.jdeveco.2022.102920

Trouble with zero: The limits of subsidizing technology adoption

Pallavi Shukla, Hemant K. Pullabhotla, Kathy Baylis

Research output: Contribution to journal › Article › peer-review

Abstract

Do users value a free technology less than one they pay for? In a two-stage randomized trial of improved grain storage technology in India, we test whether subsequent user willingness-to-pay is affected by free distribution compared to a small positive price. We find paying an initial price of zero has a strong negative effect on users’ long-run willingness-to-pay but is not associated with differences in either reported use or benefits derived from the technology. The lower valuation implies a 20 to 30 percent decrease in long-run adoption, suggesting free distribution can stifle future markets for repeat-purchase goods.

Original language	English (US)
Article number	102920
Journal	Journal of Development Economics
Volume	158
DOIs	https://doi.org/10.1016/j.jdeveco.2022.102920
State	Published - Sep 2022
Externally published	Yes

Keywords

Agricultural subsidies
Reference dependence
Technology adoption
Zero price

ASJC Scopus subject areas

Development
Economics and Econometrics

Online availability

10.1016/j.jdeveco.2022.102920

Library availability

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title = "Trouble with zero: The limits of subsidizing technology adoption",

abstract = "Do users value a free technology less than one they pay for? In a two-stage randomized trial of improved grain storage technology in India, we test whether subsequent user willingness-to-pay is affected by free distribution compared to a small positive price. We find paying an initial price of zero has a strong negative effect on users{\textquoteright} long-run willingness-to-pay but is not associated with differences in either reported use or benefits derived from the technology. The lower valuation implies a 20 to 30 percent decrease in long-run adoption, suggesting free distribution can stifle future markets for repeat-purchase goods.",

keywords = "Agricultural subsidies, Reference dependence, Technology adoption, Zero price",

author = "Pallavi Shukla and Pullabhotla, {Hemant K.} and Kathy Baylis",

note = "We thank Paul J. Ferraro, Ben Meiselman, Hope Michelson, and Ben Crost for their comments. We acknowledge funding from the ADM Institute for the Prevention of Postharvest Loss, University of Illinois . The study can be found in the AEA RCT Registry ( AEARCTR-0006661 ). We thank Paul J. Ferraro, Ben Meiselman, Hope Michelson, and Ben Crost for their comments. We acknowledge funding from the ADM Institute for the Prevention of Postharvest Loss, University of Illinois. The study can be found in the AEA RCT Registry (AEARCTR-0006661).",

year = "2022",

month = sep,

doi = "10.1016/j.jdeveco.2022.102920",

language = "English (US)",

volume = "158",

journal = "Journal of Development Economics",

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AU - Pullabhotla, Hemant K.

AU - Baylis, Kathy

N1 - We thank Paul J. Ferraro, Ben Meiselman, Hope Michelson, and Ben Crost for their comments. We acknowledge funding from the ADM Institute for the Prevention of Postharvest Loss, University of Illinois . The study can be found in the AEA RCT Registry ( AEARCTR-0006661 ). We thank Paul J. Ferraro, Ben Meiselman, Hope Michelson, and Ben Crost for their comments. We acknowledge funding from the ADM Institute for the Prevention of Postharvest Loss, University of Illinois. The study can be found in the AEA RCT Registry (AEARCTR-0006661).

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Y1 - 2022/9

N2 - Do users value a free technology less than one they pay for? In a two-stage randomized trial of improved grain storage technology in India, we test whether subsequent user willingness-to-pay is affected by free distribution compared to a small positive price. We find paying an initial price of zero has a strong negative effect on users’ long-run willingness-to-pay but is not associated with differences in either reported use or benefits derived from the technology. The lower valuation implies a 20 to 30 percent decrease in long-run adoption, suggesting free distribution can stifle future markets for repeat-purchase goods.

AB - Do users value a free technology less than one they pay for? In a two-stage randomized trial of improved grain storage technology in India, we test whether subsequent user willingness-to-pay is affected by free distribution compared to a small positive price. We find paying an initial price of zero has a strong negative effect on users’ long-run willingness-to-pay but is not associated with differences in either reported use or benefits derived from the technology. The lower valuation implies a 20 to 30 percent decrease in long-run adoption, suggesting free distribution can stifle future markets for repeat-purchase goods.

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KW - Reference dependence

KW - Technology adoption

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ER -

Trouble with zero: The limits of subsidizing technology adoption

Abstract

Keywords

ASJC Scopus subject areas

Online availability

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