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A De-biased Direct Question Approach to Measuring Consumers' Willingness to Pay

Author

Listed:
  • Reto Hofstetter
  • Klaus M. Miller
  • Harley Krohmer
  • Z. John Zhang

Abstract

Knowledge of consumers' willingness to pay (WTP) is a prerequisite to profitable price-setting. To gauge consumers' WTP, practitioners often rely on a direct single question approach in which consumers are asked to explicitly state their WTP for a product. Despite its popularity among practitioners, this approach has been found to suffer from hypothetical bias. In this paper, we propose a rigorous method that improves the accuracy of the direct single question approach. Specifically, we systematically assess the hypothetical biases associated with the direct single question approach and explore ways to de-bias it. Our results show that by using the de-biasing procedures we propose, we can generate a de-biased direct single question approach that is accu-rate enough to be useful for managerial decision-making. We validate this approach with two studies in this paper.

Suggested Citation

  • Reto Hofstetter & Klaus M. Miller & Harley Krohmer & Z. John Zhang, 2020. "A De-biased Direct Question Approach to Measuring Consumers' Willingness to Pay," Papers 2005.11318, arXiv.org.
    • Handle: RePEc:arx:papers:2005.11318
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    File URL: http://arxiv.org/pdf/2005.11318
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    Cited by:

    1. Meixner, Oliver & Nieschalk, Richard & Haas, Rainer, . "Microalgae-based Food: Consumer Perception and Willingness to Pay in Austria—a Discrete Choice Based Experiment," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 14(04).
    2. Milad Haghani & Michiel C. J. Bliemer & John M. Rose & Harmen Oppewal & Emily Lancsar, 2021. "Hypothetical bias in stated choice experiments: Part II. Macro-scale analysis of literature and effectiveness of bias mitigation methods," Papers 2102.02945, arXiv.org.
    3. Will, Christian & Lehmann, Nico & Baumgartner, Nora & Feurer, Sven & Jochem, Patrick & Fichtner, Wolf, 2022. "Consumer understanding and evaluation of carbon-neutral electric vehicle charging services," Applied Energy, Elsevier, vol. 313(C).

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