In Simple Words
Imagine asking restaurant patrons in a survey if they would pay ten dollars for a new exotic dessert, and most say yes. When the waiter brings the actual menu with real prices, almost nobody orders the dessert unless given a free discount coupon.
Households later offered insurance
- Earlier said they would buy
- 37.2% actually bought
- Earlier said they would not buy
- 44.3% actually bought
Observed groups, not assigned responses. Later offers included subsidies and covered drought only; the earlier hypothetical product covered more hazards.
See source →Research question
Hypothetical contingent valuation surveys fail to predict actual market adoption of novel financial products among smallholders. Farmers overstate willingness to pay during hypothetical interviews compared to real cash purchasing choices.
Participants
N = 2,399 rural households in baseline contingent valuation survey; N = 460 households tracked across 23 treatment villages with active insurance sales in Amhara, Ethiopia.
Study Design
Randomized control trial comparing baseline randomized contingent valuation willingness to pay against actual sales with randomized subsidy vouchers (0 to 500 Birr).
Results
Stated willingness to pay and actual insurance purchase were uncorrelated or negatively correlated (probit marginal effect = -0.0777, p < 0.10). Among households stating ex-ante willingness to pay at actuarially fair price, actual uptake was 37.2%, compared to 44.3% among those stating no ex-ante willingness. Unsubsidized demand was 0% in the study sample.
Takeaway
Evaluate market demand for agricultural microinsurance through real-money field trials with randomized price vouchers rather than hypothetical willingness-to-pay surveys.
Source and citation
See source →Read alongside the research
Plain-English glossary
Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.
- Baseline
The starting measurements in a study. Researchers use these to compare what participants were like at the start with what happens later.
ExampleBefore a training programme starts, researchers measure workers’ earnings. That first measurement is the baseline.
GET-IT glossary · Baseline characteristics ↗Read more about baseline →