Estimation of Willingness-to-Pay: Theory, Measurement, by Christoph Breidert

By Christoph Breidert

To figure out the willingness-to-pay (WTP) for items and/or companies from a shopper viewpoint is essential for contemporary methods to pricing. With the fee Estimation ( PE scene) Christoph Breidert introduces a brand new strategy to estimate WTP. it really works as an aditional interview scene appended to conjoint research and gives the respondents a dynamically generated series of product offerings with assigned costs.

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Extra info for Estimation of Willingness-to-Pay: Theory, Measurement, Application

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Customer i purchases a product if his or her wiUingness-to-pay exceeds the price of the product. The willingness-to-pay for customer i and the mobile phone is denoted by WTPim and for the headset by WTPih. The maximization problem for the profit function P for the customers 1 to 4 under pureunbundling can be formulated as follows: ^^ P = ^(^i ' (Pm - Cm) + Pi ' [Ph - Ch) subject to ai-pm < WTPim d^-Ph < WTPih Vz = l , . . , n Vi = l , . . , n Pm, Vh e H+ a^, ft € {0,1}. Under pure-unbundhng it would be optimal to offer the mobile phone at 79,99 € and the headset at 39,99 € .

Customers who refused to purchase the product are not reported in historical sales data. 3 4. Measuring Willingness-to-Pay Experiments Generally experiments can be distinguished between laboratory experiments and field experiments. Both types can be applied in pricing studies. In laboratory experiments purchase behavior is typically simulated by giving the probands an amount of money and asking them to spend the money on a specific selection of goods. The goods and prices are varied systematically.

This less restrictive assumption is sufficient to model most scenarios in economics. However, describing a preference structure in terms of a ranking is not always sufficient in a marketing context. For a marketer it is important to know, how much more some individuals prefer one alternative over another. Though it is difficult for a consumer to state how much more he or she likes some bundle over another (say twice as much), a cardinal scale exists. A consumer can very well state that he or she likes some product a lot more than another, compared to two other products between which the consumer is almost indifferent.

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