Subsidies for Technology Adoption: Experimental Evidence from Rural Cameroon

We use a two-stage experiment to study how a short-term subsidy for a new product affects uptake, usage, and future demand for the same product (a new solar lamp). We use an auction design to gauge willingness-to-pay, and randomly vary the strike price across villages to create random variation in purchase prices and uptake across villages. Our main results are that subsidies do not adversely affect subsequent product use, but stimulate uptake. If subsidies depress future willingness-to-pay, then this effect is outweighed by additional learning about the benefits of the new product. The net effect is that short-term subsidies increase future willingness-to-pay. However; prices play an important allocative role, and lowering prices via subsidies encourages uptake by households with low use intensity. We do not find any evidence supporting social learning and anchoring beyond the initial sample of beneficiaries.