Free Distribution or Cost-Sharing? Evidence from a Randomized Malaria Prevention Experiment

Abstract

It is often argued that cost-sharing-charging a subsidized, positive price-for a health product is necessary to avoid wasting resources on those who will not use or do not need the product. We explore this argument through a field experiment in Kenya, in which we randomized the price at which prenatal clinics could sell long lasting anti-malarial insecticide-treated nets (ITNs) to pregnant women. We find no evidence that costsharing reduces wastage on those that will not use the product: women who received free ITNs are not less likely to use them than those who paid subsidized positive prices. We also find no evidence that costsharing induces selection of women who need the net more: those who pay higher prices appear no sicker than the average prenatal client in the area in terms of measured anemia (an important indicator of malaria). Cost-sharing does, however, considerably dampen demand. We find that uptake drops by 75 percent when the price of ITNs increases from zero to $0.75 (i.e. from 100 to 87.5 percent subsidy), the price at which ITNs are currently sold to pregnant women in Kenya. We combine our estimates in a cost-effectiveness analysis of ITN prices on child mortality that incorporates both private and social returns to ITN usage. Overall, our results suggest that free distribution of ITNs could save many more lives than cost-sharing programs have achieved so far, and, given the large positive externality associated with widespread usage of ITNs, it would likely do so at a lesser cost per life saved.

Sunk Cost Fallacy in Driving the World’s Costliest Cars

“…2 However, the issue remains an open question, both in theory and empirically. Although Cohen and Dupas (2010) studied the use of bed nets, which are durable, they recorded usage just once. The Arkes and Blumer (1985) experiment and Gourville and Soman (1998) study pertain to usage of a facility, which differs from a durable good in that increased consumption does not affect the subsequent availability or quality of the good.…”

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

“…For various products, however, this concern about underutilization has been rebutted (see, for example, Ashraf et al 2010, Cohen and Dupas 2010. For the particular case of cookstoves, and Rosa et al (2014) observe very high usage rates in free stove distribution programs.…”

“…This is most notably due to a highly priceresponsive demand. Cohen and Dupas (2010) and Tarozzi et al (2014) observe very high price elasticities for insecticide-treated bednets, Kremer and Miguel (2007) for deworming drugs, Ashraf et al (2010) for water disinfectants, and Mobarak et al (2012) for improved biomass cookstoves. Based on this observation, Mobarak et al…”

Bednets, Information and Malaria in Orissa

“…Cohen and Dupas (2010) use an experimental intervention in Kenya to demonstrate that ITN usage conditional on adoption are not significantly affected by variations in the cost of the net (including a price of zero). Hoffmann (2008) uses experimental data to document differences in the intra-household allocation of free versus purchased ITNs in Uganda.…”

“…The results from the counterfactual exercises are also broadly in line with those from the parametric case, indicating that uptake responses to changes in prices and beliefs are modest at best. Using experimental data from Kenya, Cohen and Dupas (2010) document large drops in uptake when cost-sharing is introduced. Our analysis, however, is not suited to estimate the price elasticity at a price of zero since the model assumes strictly positive prices.…”