Do the prices of a preventive animal health product affect dairy farmers’ willingness to pay and product use? Evidence from an experimental study

Abstract Should we distribute preventive animal health products for free or charge a positive price? The decision depends on the price sensitivity of the product and the effect prices have on product use. We explore this idea through a field experiment in which we randomize the price a farmer faces for an animal health product. We find that the demand for the product is highly sensitive to prices; willingness to pay (WTP) decreased from 44% at ₹ 100 to 18% at ₹ 500. Further, among farmers who were willing to pay, the product usage rate was 71% and usage did not increase in prices (lack of screening effect). Furthermore, we find that farmers whose animals were sick in the baseline had a higher WTP. These findings support the human capital model relating to demand for human health products. We argue that individuals behave in a similar way when the decisions concern their own health or the health of an animal they rear for commercial purposes. A highly subsidized distribution of the product is recommended due to high price sensitivity, lack of screening effect, equitable distribution among poor and lesser implementation costs found in this study.