IDEAS home Printed from https://ideas.repec.org/a/spr/custns/v8y2021i3d10.1007_s40547-021-00115-y.html
   My bibliography  Save this article

Reservation Prices for Product Portfolios Under Uncertainty: the ICEPORT Approach

Author

Listed:
  • Casey E. Newmeyer

    (Case Western Reserve University)

  • R. Venkatesh

    (University of Pittsburgh)

  • Rabikar Chatterjee

    (University of Pittsburgh)

Abstract

This study rests on three premises. Consumers often make choice decisions considering multiple products from one or more categories. Consumers’ levels of uncertainty with product performance or their own preference are nuanced in such portfolio-level situations. Under such uncertainty, extant approaches for reservation price elicitation do not suffice for product portfolios. Building on these premises, the authors propose ICEPORT, an approach for Incentive Compatible Elicitation of reservation prices for product PORTfolios. ICEPORT is able to capture the range in a consumer’s reservation prices for each individual product and combinations of products on offer. An empirical application in the context of root beer and cheese puffs, and a replication involving MLB merchandise, demonstrate the superior predictive performance of ICEPORT over several alternatives. The authors note, among managerial implications of ICEPORT, its potential for improving pricing decisions. Limitations of this study and future research directions are discussed.

Suggested Citation

  • Casey E. Newmeyer & R. Venkatesh & Rabikar Chatterjee, 2021. "Reservation Prices for Product Portfolios Under Uncertainty: the ICEPORT Approach," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 8(3), pages 51-65, September.
    • Handle: RePEc:spr:custns:v:8:y:2021:i:3:d:10.1007_s40547-021-00115-y
    DOI: 10.1007/s40547-021-00115-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40547-021-00115-y
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40547-021-00115-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jihwan Moon & Steven M. Shugan, 2018. "Explaining Bundle-Framing Effects with Signaling Theory," Marketing Science, INFORMS, vol. 37(4), pages 668-681, August.
    2. Dost, Florian & Wilken, Robert, 2012. "Measuring willingness to pay as a range, revisited: When should we care?," International Journal of Research in Marketing, Elsevier, vol. 29(2), pages 148-166.
    3. Charles R. Plott & Kathryn Zeiler, 2005. "The Willingness to Pay–Willingness to Accept Gap, the "Endowment Effect," Subject Misconceptions, and Experimental Procedures for Eliciting Valuations," American Economic Review, American Economic Association, vol. 95(3), pages 530-545, June.
    4. Calder, Bobby J & Phillips, Lynn W & Tybout, Alice M, 1982. "The Concept of External Validity," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 9(3), pages 240-244, December.
    5. Roland T. Rust & J. Jeffrey Inman & Jianmin Jia & Anthony Zahorik, 1999. "What You Know About Customer-Perceived Quality: The Role of Customer Expectation Distributions," Marketing Science, INFORMS, vol. 18(1), pages 77-92.
    6. John H. Roberts & Glen L. Urban, 1988. "Modeling Multiattribute Utility, Risk, and Belief Dynamics for New Consumer Durable Brand Choice," Management Science, INFORMS, vol. 34(2), pages 167-185, February.
    7. Inman, J Jeffrey & McAlister, Leigh & Hoyer, Wayne D, 1990. "Promotion Signal: Proxy for a Price Cut?," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 17(1), pages 74-81, June.
    8. Vithala R. Rao & Gary J. Russell & Hemant Bhargava & Alan Cooke & Tim Derdenger & Hwang Kim & Nanda Kumar & Irwin Levin & Yu Ma & Nitin Mehta & John Pracejus & R. Venkatesh, 2018. "Emerging Trends in Product Bundling: Investigating Consumer Choice and Firm Behavior," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 5(1), pages 107-120, March.
    9. Dan Ariely & George Loewenstein & Drazen Prelec, 2003. ""Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 73-106.
    10. Moorthy, Sridhar & Ratchford, Brian T & Talukdar, Debabrata, 1997. "Consumer Information Search Revisited: Theory and Empirical Analysis," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 23(4), pages 263-277, March.
    11. Preyas S. Desai & Devavrat Purohit & Bo Zhou, 2018. "Allowing Consumers to Bundle Themselves: The Profitability of Family Plans," Marketing Science, INFORMS, vol. 37(6), pages 953-969, November.
    12. Kamel Jedidi & Z. John Zhang, 2002. "Augmenting Conjoint Analysis to Estimate Consumer Reservation Price," Management Science, INFORMS, vol. 48(10), pages 1350-1368, October.
    13. Kamel Jedidi & Sharan Jagpal & Puneet Manchanda, 2003. "Measuring Heterogeneous Reservation Prices for Product Bundles," Marketing Science, INFORMS, vol. 22(1), pages 107-130, July.
    14. Urbany, Joel E & Dickson, Peter R & Wilkie, William L, 1989. "Buyer Uncertainty and Information Search," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 16(2), pages 208-215, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dost, Florian & Wilken, Robert, 2012. "Measuring willingness to pay as a range, revisited: When should we care?," International Journal of Research in Marketing, Elsevier, vol. 29(2), pages 148-166.
    2. James Agarwal & Wayne DeSarbo & Naresh K. Malhotra & Vithala Rao, 2015. "An Interdisciplinary Review of Research in Conjoint Analysis: Recent Developments and Directions for Future Research," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 2(1), pages 19-40, March.
    3. Dost, Florian & Geiger, Ingmar, 2017. "Value-based pricing in competitive situations with the help of multi-product price response maps," Journal of Business Research, Elsevier, vol. 76(C), pages 219-236.
    4. Erik Maier & Robert Wilken & Florian Dost, 2015. "The double benefits of consumer certainty: combining risk and range effects," Marketing Letters, Springer, vol. 26(4), pages 473-488, December.
    5. Gensler, Sonja & Hinz, Oliver & Skiera, Bernd & Theysohn, Sven, 2012. "Willingness-to-pay estimation with choice-based conjoint analysis: Addressing extreme response behavior with individually adapted designs," European Journal of Operational Research, Elsevier, vol. 219(2), pages 368-378.
    6. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    7. Jonas Schmidt & Tammo H. A. Bijmolt, 2020. "Accurately measuring willingness to pay for consumer goods: a meta-analysis of the hypothetical bias," Journal of the Academy of Marketing Science, Springer, vol. 48(3), pages 499-518, May.
    8. Chan Choi, S., 2017. "Defensive strategy against a private label: Building brand premium for retailer cooperation," Journal of Retailing and Consumer Services, Elsevier, vol. 34(C), pages 335-339.
    9. Ritwik Raj & Mark H. Karwan & Chase Murray & Lei Sun, 2022. "Itemized pricing in B2B bundles with diminishing reservation prices and loss averse customers," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(4), pages 375-392, August.
    10. Drew Fudenberg & David K. Levine & Zacharias Maniadis, 2012. "On the Robustness of Anchoring Effects in WTP and WTA Experiments," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 131-145, May.
    11. Henk Folmer & Olof Johansson-Stenman, 2011. "Does Environmental Economics Produce Aeroplanes Without Engines? On the Need for an Environmental Social Science," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(3), pages 337-361, March.
    12. Oben K Bayrak & Bengt Kriström, 2016. "Is there a valuation gap? The case of interval valuations," Economics Bulletin, AccessEcon, vol. 36(1), pages 218-236.
    13. Zhu, Yimin & Zhang, Jiemin & Wu, Jifei & Liu, Yingyue, 2022. "AI is better when I'm sure: The influence of certainty of needs on consumers' acceptance of AI chatbots," Journal of Business Research, Elsevier, vol. 150(C), pages 642-652.
    14. Li, Jianbin & Liu, Lang & Luo, Xiaomeng & Zhu, Stuart X., 2023. "Interactive bundle pricing strategy for online pharmacies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 177(C).
    15. Mohit Tyagi & Nomesh B. Bolia, 2024. "Optimal pricing of subscription services in the restaurant industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(3), pages 262-273, June.
    16. van Schie, Ron J.G. & Donkers, Bas & Dellaert, Benedict G.C., 2012. "Savings adequacy uncertainty: Driver or obstacle to increased pension contributions?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 882-896.
    17. Marine Le Gall-Ely, 2009. "Définition, mesure et déterminants du consentement à payer du consommateur : synthèse critique et voies de recherche," Post-Print hal-00522826, HAL.
    18. Masatlioglu, Yusufcan & Uler, Neslihan, 2013. "Understanding the reference effect," Games and Economic Behavior, Elsevier, vol. 82(C), pages 403-423.
    19. Carola Braun & Katrin Rehdanz & Ulrich Schmidt, 2016. "Validity of Willingness to Pay Measures under Preference Uncertainty," PLOS ONE, Public Library of Science, vol. 11(4), pages 1-17, April.
    20. Jie Jennifer Zhang & Bing Jing, 2007. "The Impacts of Shopbots on Online Consumer Search," Working Papers 07-34, NET Institute, revised Sep 2007.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:custns:v:8:y:2021:i:3:d:10.1007_s40547-021-00115-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.