The More Choice, the Better? Evidence from Experimental Auctions in Rural Senegal
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Key Findings
- We use auctions to study how multiple alternatives affect willingness to pay (WTP).
- WTP for the advanced alternative is lower when households have another option.
- Ability to compare and gauge fit with household needs is a possible mechanism.
Economists generally believe that more choice is beneficial, yet bigger choice sets can impose opportunity, error and cognitive costs that lower demand. We study this relationship in the context of rural energy use in low-income settings. We invited approximately 1100 randomly selected Senegalese households to participate in second-price auctions for improved cookstoves, and exogenously varied the number and types of devices being auctioned to identify the causal impact of expanded choice on willingness to pay (WTP). Expanded choice lowered WTP for a more advanced but relatively unfamiliar cookstove by 25%, but had no effect on WTP for a simpler, locally produced device. Households’ ability to compare alternatives side-by-side during multi-device auctions and identify the one best suited to their needs appears to drive these results. Our findings have implications for the design of policies that aim to introduce welfare-improving technologies in remote, rural areas.
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