Does Price Have a Payoff? A Comparison of the Traditional NGO Model With the Micro-Consignment Model
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Various non-governmental organizations (NGOs) have sought to alleviate the problem of limited access to clean drinking water in Guatemalan villages by providing them with water filters. While traditional NGOs donate filters for free, some NGOs operating under the new “micro-consignment” model sell them. By comparing these two different NGO approaches in a two-period theoretical framework, it is shown that the goals of generating the greatest household utility and inducing the highest maintenance effort for the filter are incompatible. In most cases, a free filter maximizes household utility, while charging a price induces more maintenance effort.
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