The Price Elasticity of Demand for Condoms Experimental Evidence from rural Zambia

The Price Elasticity of Demand for Condoms Experimental Evidence from rural Zambia Sarah Nohr KfW, Heidelberg University David Seidenfeld American Institutes for Research European Evaluation Society 11 th EES Biennial Conference Dublin, October 2014 Bank aus Verantwortung

2 Outline Background Research question Study design Results Conclusion

3 Background High rates of HIV but low rates of condom use in Zambia 13 % of the population is HIV-positive in Zambia Main drivers of the epidemic: Multiple and concurrent partnerships Low condom use With any partner With marital partner

Key measure: condom social marketing since 1992 Demand side Behavior change campaigns Increased knowledge and risk perception Increased demand for condoms Supply side Decentralized provision of subsidized condoms (in local shops, kiosks, pharmacies) Increased availability of condoms at subsidized price Intervention Increased condom sales Increased condom use Reduction in transmission of HIV and other STIs Output Outcome Impact 4

5 Background Research cooperation to study condom demand in rural Zambia KfW supports social marketing on behalf of the German Government Ex post evaluation of social marketing program in Zambia 2012 In-depth experimental study on condom demand in 2013 Research cooperation between KfW, AIR, Family Health Trust, Palm Associates

6 Main Research Question What is the effect of price on condom demand? Debate on the pricing of health products: $ $? Price is essential in social marketing programs Enables distribution through commercial channels Signals quality to the customer Reduces wastage Evidence on the effect of price on condom demand is scarce

7 Design Katete District, Eastern Zambia 5 rural clinics 70 000 people 320 villages, naturally clustered Only source of condoms: clinics distribute no logo condoms for free

The experiment creates decentralized condom sales options 119 community health volunteers sell branded social marketing condoms at 3 randomized prices 25 ngwee (0.05 USD) 50 ngwee (0.10 USD) 100 ngwee (0.20 USD) 8

Design Condom agents sell condoms in their village cluster 9

Results Demand for condoms is very price sensitive Average quantity of condoms sold per agent in 4 months by price Mean sales 100 150 200-45% - 45% 0 50 25 50 100 Price Mean sales 95% CI 10

Results Demand for condoms is very price sensitive Agent-level Regression Analysis of Condom Demand (1) (2) (3) (4) (5) (6) Aggregate Demand: Condom packs sold Extensive Margin Number of customers Intensive Margin Condom packs per customer Constant 138.5 119.64 59.13 52.11 2.396 2.118 (13.93) (49.16) (5.630) (20.71) (0.119) (0.618) p=50-60.73 ** -64.68 *** -16.33 * -17.41 ** -0.641 *** -0.676 *** (18.86) (17.21) (7.86) (6.466) (0.152) (0.138) p=100-96.12 *** -94.41 *** -30.66 *** -30.31 *** -0.878 *** -0.877 *** (14.40) (12.75) (6.105) (5.134) (0.136) (0.135) Population -0.0060-0.0019-0.00003 (0.0101) (0.0036) (0.00008) Distance to clinic 0.131 0. 0341 0.00024 (0.166) (0.0386) (0.00072) Agent characteristics: yes yes yes Clinic controls yes yes yes R2 0.2458 0.3964 0.1509 0.4124 0.2769 0.4310 N 119 119 119 119 119 119 11

12 Results High condom demand at the agents, low demand at clinics Incidences of condom acquisition during the study period: At the clinics: 442 At the agents: 5,538

13 Conclusion Demand for condoms is highly price sensitive Condoms must be highly subsidized to reach a large part of the population (extensive margin) Low number of condom packs bought per person: Condom use is not consistent (intensive margin) Population buys condoms despite free condoms at the clinic: Population is also sensitive to distance (price of free condoms) Other factors: opening hours and privacy at clinic

Thank you! 14

17 Design Condom sales agents are villagers with history of volunteering to provide health education to communities

18 Randomization Check Agent s Characteristics by Price Total Sample Price in Ngwee p-value 25 50 100 Number of agents 119 40 40 39 Mean age in years 33.24 32.73 34.58 32.38 0.4731 Male agents (%) 58.82 60.00 57.50 58.97 0.9749 Years of education completed 9.05 9.00 8.98 9.18 0.8389 Mean travel time to nearest clinic (minutes by bicycle, round-trip) 90.06 86.55 105.25 78.10 0.2888 Population in village cluster 718.89 739.83 670.74 746.79 0.8098 Note:p-values for joint testof equality of means across price groups.

19 Design Data 1. Short survey to all individuals acquiring condoms At the agents AND at the clinics Purchase, standard demographics, HIV knowledge and behavior 2. Agent information (standard demographics) 3. Village information (population size, distance to clinic)

21 Main reason for buying condoms instead of receiving free ones at the clinic Not aware of free condoms Clinic is too far 57 % Opening hours of clinic No condoms available Not enough privacy Clinic condoms are bad quality 0 20 40 60 percent