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Measuring willingness to pay as a range, revisited: When should we care?

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Measuring willingness to pay as a range, revisited : When should we care? / Dost, Florian; Wilken, Robert.

In: International Journal of Research in Marketing, Vol. 29, No. 2, 06.2012, p. 148-166.

Research output: Contribution to journalJournal articlepeer-review

Harvard

Dost, F & Wilken, R 2012, 'Measuring willingness to pay as a range, revisited: When should we care?', International Journal of Research in Marketing, vol. 29, no. 2, pp. 148-166. https://doi.org/10.1016/j.ijresmar.2011.09.003

APA

Dost, F., & Wilken, R. (2012). Measuring willingness to pay as a range, revisited: When should we care? International Journal of Research in Marketing, 29(2), 148-166. https://doi.org/10.1016/j.ijresmar.2011.09.003

Vancouver

Dost F, Wilken R. Measuring willingness to pay as a range, revisited: When should we care? International Journal of Research in Marketing. 2012 Jun;29(2):148-166. https://doi.org/10.1016/j.ijresmar.2011.09.003

Author

Dost, Florian ; Wilken, Robert. / Measuring willingness to pay as a range, revisited : When should we care?. In: International Journal of Research in Marketing. 2012 ; Vol. 29, No. 2. pp. 148-166.

Bibtex

@article{71a58e32417b47d69466c7adf8ce920b,
title = "Measuring willingness to pay as a range, revisited: When should we care?",
abstract = "Recent research has conceptualized consumers{\textquoteright} willingness to pay (WTP) as a range rather than as a single point. However, there are important gaps in this research stream: The existing method to measure WTP as a range, ICERANGE, features restrictive assumptions and is rather complex, such that it hampers real-world applications. Furthermore, it is unclear what has been measured in the past with point-based methods, compared with WTP ranges; thus, researchers cannot evaluate “traditional” WTP measurements. Most importantly, why should anyone even care about WTP ranges? In making pricing decisions, aggregate-level information is common, and the add-on information contained in individual WTP ranges would seemingly become obsolete when averaging it across consumers. This article addresses all three issues: We show empirically that traditional point-based methods reveal the midpoint of WTP ranges. Our proposed range-based method, which is simpler and less restricted than ICERANGE, achieves comparable performance. We use a Monte Carlo simulation to show that, except for in rather artificial conditions, point-based methods fail to reproduce the revenue-maximizing prices identified by range-based methods. Together, these results deliver a compelling argument for the use of range-based methods to elicit WTP in real-world applications.",
keywords = "Willingness to pay as a range, ICERANGE, BDM mechanism, Demand functions, Monte Carlo simulation",
author = "Florian Dost and Robert Wilken",
year = "2012",
month = jun,
doi = "10.1016/j.ijresmar.2011.09.003",
language = "English",
volume = "29",
pages = "148--166",
journal = "International Journal of Research in Marketing",
issn = "0167-8116",
publisher = "Elsevier",
number = "2",

}

RIS

TY - JOUR

T1 - Measuring willingness to pay as a range, revisited

T2 - When should we care?

AU - Dost, Florian

AU - Wilken, Robert

PY - 2012/6

Y1 - 2012/6

N2 - Recent research has conceptualized consumers’ willingness to pay (WTP) as a range rather than as a single point. However, there are important gaps in this research stream: The existing method to measure WTP as a range, ICERANGE, features restrictive assumptions and is rather complex, such that it hampers real-world applications. Furthermore, it is unclear what has been measured in the past with point-based methods, compared with WTP ranges; thus, researchers cannot evaluate “traditional” WTP measurements. Most importantly, why should anyone even care about WTP ranges? In making pricing decisions, aggregate-level information is common, and the add-on information contained in individual WTP ranges would seemingly become obsolete when averaging it across consumers. This article addresses all three issues: We show empirically that traditional point-based methods reveal the midpoint of WTP ranges. Our proposed range-based method, which is simpler and less restricted than ICERANGE, achieves comparable performance. We use a Monte Carlo simulation to show that, except for in rather artificial conditions, point-based methods fail to reproduce the revenue-maximizing prices identified by range-based methods. Together, these results deliver a compelling argument for the use of range-based methods to elicit WTP in real-world applications.

AB - Recent research has conceptualized consumers’ willingness to pay (WTP) as a range rather than as a single point. However, there are important gaps in this research stream: The existing method to measure WTP as a range, ICERANGE, features restrictive assumptions and is rather complex, such that it hampers real-world applications. Furthermore, it is unclear what has been measured in the past with point-based methods, compared with WTP ranges; thus, researchers cannot evaluate “traditional” WTP measurements. Most importantly, why should anyone even care about WTP ranges? In making pricing decisions, aggregate-level information is common, and the add-on information contained in individual WTP ranges would seemingly become obsolete when averaging it across consumers. This article addresses all three issues: We show empirically that traditional point-based methods reveal the midpoint of WTP ranges. Our proposed range-based method, which is simpler and less restricted than ICERANGE, achieves comparable performance. We use a Monte Carlo simulation to show that, except for in rather artificial conditions, point-based methods fail to reproduce the revenue-maximizing prices identified by range-based methods. Together, these results deliver a compelling argument for the use of range-based methods to elicit WTP in real-world applications.

KW - Willingness to pay as a range

KW - ICERANGE

KW - BDM mechanism

KW - Demand functions

KW - Monte Carlo simulation

U2 - 10.1016/j.ijresmar.2011.09.003

DO - 10.1016/j.ijresmar.2011.09.003

M3 - Journal article

VL - 29

SP - 148

EP - 166

JO - International Journal of Research in Marketing

JF - International Journal of Research in Marketing

SN - 0167-8116

IS - 2

ER -