An Empirical Comparison of Methods for Measuring Consumers' Willingness to Pay

• Published in: Marketing letters Vol. 17; no. 2; pp. 137 - 149
• Main Author: Voelckner, Franziska
• Format: Journal Article
• Language: English
• Published: New York Springer 01.04.2006; Springer Nature B.V
• Subjects: Analytical estimating; Auctions; Bidding; Bids; Brands; Conjoint analysis; Consumer behavior; Consumer research; Consumers; Decision making; Demand analysis; Demand functions; Doughnuts; Economic methodology; Economic value; Elicitation; Estimates; Estimation methods; Measurement techniques; Optimal pricing; Payments; Pricing; Pricing policies; Reservation prices; Studies; Valuation; Value; Welfare economics; Welfare measurement; Willingness to pay
• ISSN: 0923-0645; 1573-059X
• DOI: 10.1007/s11002-006-5147-x

A valid procedure for measuring consumers' willingness to pay (WTP) is crucial in designing optimal pricing policies or for estimating demand for new products. Understanding potential sources of differences in WTP estimates that emerge from value elicitation studies constitutes an important step in research on how managers should estimate consumers' WTP. This research presents an empirical analysis of two potential sources of differences and discusses possible means of mitigating them. We find substantial and significant differences between the WTP reported by subjects when payment of the stated price is real or hypothetical. Notwithstanding the dichotomy between real and hypothetical WTP, we find significant differences among the WTP estimates of a broad range of value elicitation methods.