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Estimating Willingness to Pay with Exaggeration Bias-Corrected Contingent Valuation Method

Author

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  • Joo Heon Park

    (Department of Economics, Dongduk Women's University, Sungbuk-Gu, Seoul 136-714, Korea)

  • Douglas L. MacLachlan

    (Department of Marketing and International Business, Michael G. Foster School of Business, University of Washington, Seattle, Washington 98195)

Abstract

Estimates of the prices customers are willing to pay for new products or services using responses from survey questionnaires are notoriously biased on the high side. An approach to obtaining more realistic estimates is suggested here, called the exaggeration bias-corrected contingent valuation method (EBC-CVM). The method is an alternative to conventional contingent valuation methods (CVMs) that have been used in economics and, to a lesser extent, in marketing. Two experiments and one field study are presented to demonstrate the effectiveness of the method. In each case, the proposed method outperformed conventional CVMs in comparison with real choices or more realistic price estimates.

Suggested Citation

  • Joo Heon Park & Douglas L. MacLachlan, 2008. "Estimating Willingness to Pay with Exaggeration Bias-Corrected Contingent Valuation Method," Marketing Science, INFORMS, vol. 27(4), pages 691-698, 07-08.
    • Handle: RePEc:inm:ormksc:v:27:y:2008:i:4:p:691-698
    DOI: 10.1287/mksc.1070.0321
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    3. Won Seok Lee & Choong-Ki Lee & Yooshik Yoon & Jihee Kim, 2015. "Research Note: Exaggeration Bias-Corrected Contingent Valuation Method: The Case of Olle Trail," Tourism Economics, , vol. 21(6), pages 1323-1330, December.
    4. Nagy, Benedek, 2012. "A repülőtéri zsúfoltságkezelési módszerek hatékonysága [The efficiency of methods to treat crowding in airports]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 74-91.
    5. Aaron Baird & Chadwick J. Miller & T. S. Raghu & Rajiv K. Sinha, 2016. "Product Line Extension in Consumer Software Markets in the Presence of Free Alternatives," Information Systems Research, INFORMS, vol. 27(2), pages 282-301, June.
    6. Christian Schlereth & Christine Eckert & Bernd Skiera, 2012. "Using discrete choice experiments to estimate willingness-to-pay intervals," Marketing Letters, Springer, vol. 23(3), pages 761-776, September.
    7. Park, Joo Heon & MacLachlan, Douglas L. & Love, Edwin, 2011. "New product pricing strategy under customer asymmetric anchoring," International Journal of Research in Marketing, Elsevier, vol. 28(4), pages 309-318.
    8. Vishva Danthurebandara & Jie Yu & Martina Vandebroek, 2011. "Sequential choice designs to estimate the heterogeneity distribution of willingness-to-pay," Quantitative Marketing and Economics (QME), Springer, vol. 9(4), pages 429-448, December.
    9. Ke-Wei Huang, 2009. "Optimal criteria for selecting price discrimination metrics when buyers have log-normally distributed willingness-to-pay," Quantitative Marketing and Economics (QME), Springer, vol. 7(3), pages 321-341, September.
    10. Won Seok Lee, 2020. "A Study on the Value of Preserving a Parasitic Volcanic Sieve as a Tourism Good for Sustainable Management: Using the Contingent Valuation Method," Sustainability, MDPI, vol. 12(7), pages 1-12, April.
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