Clean Water, Health and the Market Mechanism: How Effective is the Market at Allocating Health Goods?

This project investigates how effectively the market mechanism allocates health goods. We study the extent to which charging for health goods leads to screening – allocating health goods towards those who stand to benefit the most – versus selection – allocation towards those with more resources, independent of potential benefit. We offer water filters for sale to rural households at randomized prices. Our sales mechanism allows us to observe not just a purchase decision, but also the household’s exact willingness to pay for the filter. Prior to sale, we measure baseline levels of water quality and prevelance of water-related disease. After the sale, we track changes in health at the household level. The randomization of prices allows us to study the relationship between health benefits and willingness to pay.