Short‐run subsidies and long‐run willingness to pay: Learning and anchoring in an agricultural experiment in Ethiopia

Abstract

AbstractWe study how temporary provision of an agricultural innovation at zero cost affects long‐run demand for that innovation. Our experimental design enables us to distinguish between an “anchoring effect” of subsidies and a “learning effect.” We document large and persistent anchoring and learning effects. For the innovation that we consider, an integrated pest management (IPM) package for Ethiopian smallholder farmers, the learning effect dominates the anchoring effect, so temporary subsidized provision promotes long‐run technology diffusion.