Customer knowledge and the price-quality gradient
Abstract
How can firms in low-income countries be incentivized to upgrade quality? One pathway is providing access to foreign customers with a higher income, a demand for quality and access to information about achieving such quality. However, this route is only available to a small fraction of firms in low-income countries. As income levels and preferences are hard to treat at scale, improving the “savviness” of domestic customers becomes the only policy instrument to change the demand for quality provision. Armstrong and Chen (2009) show theoretically that boosting the share of savvy consumers can increase aggregate quality, producer surplus and overall welfare. We conducted a framed field experiment in Uganda, showing that a simple information-provision intervention can indeed improve the ability of consumers to discern quality.
About Lore Vandewalle
Lore Vandewalle is a Professor (hoogleraar) of Economics at the KU Leuven. She is also a Professor of Economics at the Geneva Graduate Institute (20%). Since September 2020, she has been affiliated with the Abdul Latif Jameel Poverty Action Lab (J-PAL).She is an applied microeconomist and her research mainly focuses on financial inclusion, micro-enterprise development and gender in India, Bangladesh and Uganda. She has also been working on political reservations and public good provision in India.
Language
English
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