There is no general consensus among policy makers, development practitioners and academicians on how to disseminate good/items if the markets fail to generate a substantial penetration of the product (Bensch and Peters, 2012). One example which this paper has focused on is clean and energy efficient technologies such as the improved cookstoves. Despite the health, economic and climate benefit of improved cookstoves, their demand is surprisingly low in rural areas of many less-developed countries. Most nongovernmental organizations that are involved in the dissemination of improved stoves reject the option of distributing ICS for free (Martin et al. 2011). While others argued that if liquidity and credit constrained people have high valuation for the good/item, it is more likely that these people will use goods/items that are distributed with subsidy.
This project, using a randomized experiment in rural Ethiopia, studies whether price incentives (sunk cost and screening effects) do matter on the use of improved stove. The study is based on a free distribution of improved stoves to 150 households in six villages and 150 households from other six villages that paid a positive price using the Becker-DeGroot-Marschak biding method. A baseline and follow up data is conducted in both village types.
