Abstract
We use an incentive compatible experimental auction to measure demand for a new agricultural technology, a triple layered hermetic storage bag. When used properly, the bag creates an airtight seal that reduces storage loss from insect pests and neutralizes aflatoxin contamination in stored grain. We find that demand for this new technology is highly elastic (4.3) and that the wholesaler could increase profit by lowering the price. We also find that farmers’ valuation for the bag is not significantly different based on the medium through which information about it is communicated to them, either text, audio or video messages. This suggests that practitioners should use the cheapest option for disseminating information, which is text messaging in this context. In addition, we find that farmers who have prior awareness of the bag are willing to pay 20% more on average than those previously unaware of it. In total, the highly elastic demand for the improved bags, along with the fact that prior awareness of the bag leads to higher willingness to pay, suggests that a one-time price subsidy for the new technology could spur demand and increase future adoption.
Highlights
What drives the adoption of new farm technologies amongst smallholder farmers in the developing world? This is an important question for policymakers and researchers, because new technologies can increase agriculture productivity, improve food security and help enhance the economic status of farming households
Results from our BDM auction reveal that demand for the Purdue Improved Crop Storage (PICS) bag is highly elastic, with an elasticity estimated at 4.3 between the price range of KSh 200 and KSh 250.2 This high elasticity suggests that the wholesaler for PICS bags in Kenya could increase their profit by 29% if they lower the suggested retail price from KSh 250 to KSh 200
We find that WTP is not significantly different for people who learned about the technology through either text or video messages, compared to audio messages
Summary
What drives the adoption of new farm technologies amongst smallholder farmers in the developing world? This is an important question for policymakers and researchers, because new technologies can increase agriculture productivity, improve food security and help enhance the economic status of farming households. What drives the adoption of new farm technologies amongst smallholder farmers in the developing world? The objective of the present article is to measure demand for a new agricultural technology, a triple layered hermetic (airtight) storage bag amongst smallholders in Kenya using an experimental BDM auction (following Becker et al, 1964). The bag, called a Purdue Improved Crop Storage (PICS) bag, creates an airtight seal that reduces storage loss from insect pests and neutralizes aflatoxin contamination in stored grain. The present article is concerned with estimating WTP among smallholders for a new, improved storage technology designed to reduce losses from insects, mold and rats during on-farm storage. Insect pests alone can damage 20–30% of a stored crop after six months (Boxall, 2001) In addition to these losses, there is depreciation in the economic value of damaged maize. In a study in Benin, Kadjo et al (2016) use revealed preference methods to measure price discounts and find that damaged grain is discounted by 3% on average, these price discounts for damaged maize disappear as people grow desperate in the lean season
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