In Simple Words
Imagine a store selling a new emergency radio for fifty dollars, and zero customers buy it. When the manager hands out ten-dollar gift vouchers, crowds immediately use the vouchers to buy partial insurance coverage, even though almost no one pays additional cash out of their own pockets.
Farm households offered insurance
- No subsidy voucher
- 0% bought insurance
- Some subsidy voucher
- More households bought insurance
First sales year, 2012 pilot study sample. Vouchers varied in value; many buyers insured only the land covered by their voucher. This is not a universal subsidy effect.
See source →Research question
Commercial weather index insurance experiences zero adoption among smallholders at unsubsidized market prices, but introducing promotional discount vouchers triggers significant purchasing jumps that linear price elasticity models fail to project.
Participants
N = 460 rural smallholder households tracked across 23 treatment villages with active insurance sales in Amhara, Ethiopia.
Study Design
Randomized control trial assigning individual-level price discount vouchers (0 to 500 Birr) evaluated via probit regressions with Kebele-fixed effects.
Results
Unsubsidized uptake was exactly 0% among study subjects receiving no voucher. Receiving a voucher increased insurance purchase probability by 34.4% to 38.0% (p < 0.01), with only 21% of buyers contributing any personal cash beyond the voucher value.
Takeaway
Deploy promotional subsidy vouchers during initial market rollouts to induce trial and overcome zero-demand adoption barriers for complex novel financial products.