Experimental Markets for Micronutrient Supplements to Prevent Undernutrition: Household Demand Persistence in Burkina Faso

• Development Workshop

Date and Location

Monday, January 12, 2015, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

The success of Plumpy’Nut® in treating severe acute malnutrition revolutionized the treatment of malnutrition and sparked efforts to develop Lipid-based Nutrient Supplement (LNS) products aimed at preventing undernutrition. The move from therapeutic to preventative LNS products has fundamental implications for supply chains and implies that private demand and the private sector will likely play central roles in the distribution of these products. We use experimental markets in rural Burkina Faso to shed light on household demand for preventative LNS and explore associated product distribution challenges. We conducted experimental auctions for a ‘small quantity’ (SQ) LNS product to gauge initial demand. Then, in collaboration with local vendors, we conducted a year-long market trial in 14 villages that enabled us to test the effect of both price and non-price factors on the persistence of household demand. We find that price elasticity of demand for these supplements is high on average (-5), but that persistent demand is significantly more price sensitive (-8) than first-time purchases (-2.4). We also find that a loyalty card that offers a small reward for a month of purchases may boost persistent demand more effectively than direct price subsidies. Both the price and non-price demand effects diminish after a few weeks. Even when SQ-LNS products or other micronutrient products are cost-effective as an investment in early childhood health, our results suggest that private demand may cover less than half the production and distribution costs, underscoring the need for innovative supply chains and hybrid private-public delivery strategies.