Does purchase price matter for the waiting time to start using energy efficient technologies: Experimental evidence from rural Ethiopia?

Abstract

In this study we conducted a randomized experiment in rural Ethiopia to test on how quickly energy efficient technology (an improved stove) is put in use after the technologies is disseminated. We evaluate two concepts that may affect usage of a product: screening (related to valuation of a product) and sunk cost effects (based on the price the potential user paid for the product). A standard Tobit and IV-Tobit methods of estimations are used for testing sunk cost and screening effects, respectively. Results based on the baseline survey and follow up data shows that there is no difference in the length of waiting time to start using the energy efficient technology between those who got the stove for free and those that paid money for it; in other words, the sunk cost effect is absent. However, we find a difference in the waiting time between those with high valuation for the stove and those with lower valuation for it; in other words, we find an evidence of the screening effect. The result has pricing policy implications for government and non-government organizations involved in dissemination of such technologies that have both public (environmental) and private benefits.