Andrew Simons is a PhD candidate at Cornell’s Dyson School and is currently on the job market.
In a previous post, I discussed how daily cooking produces smoke that is killing millions of people every year in developing countries. One possible solution to easing the health, environmental, and economic burdens of cooking with solid biomass fuels is switching to the use of cleaner-burning cookstoves. However, despite their potential benefits, there has been “puzzlingly low” demand for fuel-efficient cookstoves. The low demand for cookstoves has generated much debate within the international development community. Resolving this debate would allow policy-makers to tailor strategies to target what works and not waste resources on strategies that don’t work.
One active question is whether low adoption of cookstoves is due to lack of adequate product information or due to household financial constraints (for example, the Global Alliance for Clean Cookstoves divides its “Demand Creation” strategy into two parts: (1) consumer awareness and (2) consumer finance). We examined this question in an experimental setting in rural Uganda and recently published our results in the Journal of Economic Behavior and Organization. This work is co-authored with Theresa Beltramo, Garrick Blalock, and David I. Levine, and we extend special thanks to Joseph Arineitew Ndemere, Juliet Kyayesimira, Stephen Harrell, and the Center for Integrated Research and Community Development (CIRCODU) for managing field-based operations.
We ran the experiment in 36 parishes in southwestern Uganda and had more than 2,200 respondents participate. Upon arriving in a new parish, we held a community-wide sales meeting; anyone with an interest could attend the meeting. At the sales meeting we enumerated a basic demographic survey then randomly split participants into four groups. The groups then simultaneously received one of four informational marketing messages about the fuel-efficient cookstoves: (1) “this stove can improve health,” (2) “this stove can save time and money,” (3) both messages combined, and (4) no message. This last control group did not receive a marketing message, but instead held a discussion about regular cooking practices. Then we re-assembled all participants, did a live cooking demonstration with the cookstove for sale (Envirofit G-3300), and explained how the sealed second-price auction worked (i.e., participants submit sealed bids for the cookstove, then the highest bidder pays the second highest price).
Each participant had the chance to participate in two auctions. One was a “pay within a week” auction. The other was a “time payments” auction that allowed the winner to pay in four equal weekly installments. After revealing auction outcomes, the sales team collected the deposit (25% of the sales price) from the winning bidders. The pay within a week auction winners then had seven days to bring the rest of their money and collect the cookstove. The winners of the time payments auction paid the remaining sum of the sales price over the four weeks, but received their stove immediately.
The average bid for the stove was USD$4.86 in the pay within a week auction and USD$6.83 for the time payments auction. This is a 40% increase in willingness to pay for the fuel-efficient cookstove when liquidity constraints are lessened and the difference between the two average bids is statistically significant (p<0.01).
The figure below shows the sample-wide preference for time payments by plotting the share of respondents by bid amount for each auction type. The curve for the time payments auction lies to the right of the pay within a week auction curve, indicating that at any given price a larger share of respondents bid that amount in the time payments auction than in the pay within a week auction. There are no statistically significant differences in average bids across the groups receiving the four marketing messages in either auction type.
An additional interesting finding is that female respondents consistently bid about 20% less than male respondents in both auction types. This finding is consistent with other work on cookstoves, which finds that while women may have a stronger preference for the cleaner-burning stoves, they have less authority over household finances.
These findings contribute evidence to the current debate concerning household barriers to purchasing cleaner-burning cookstoves. Our research shows that relieving household financial constraints is more effective than relieving informational barriers in encouraging the purchase of cookstoves. Additionally, our findings support others that have found gender to be an important determinant of willingness to pay for cookstoves.
The paper’s authors thank the United States Agency for International Development, the Atkinson Center for a Sustainable Future at Cornell University, the Institute for the Social Sciences at Cornell University, and the Cornell Population Center for funding the study.