Estimation of Willingness-to-Pay: Theory, Measurement, by Christoph Breidert

By Christoph Breidert

To figure out the willingness-to-pay (WTP) for items and/or providers from a buyer viewpoint is important for contemporary ways to pricing. With the fee Estimation ( PE scene) Christoph Breidert introduces a brand new technique to estimate WTP. it really works as an aditional interview scene appended to conjoint research and provides the respondents a dynamically generated series of product offerings with assigned costs.

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By Christoph Breidert

To figure out the willingness-to-pay (WTP) for items and/or providers from a buyer viewpoint is important for contemporary ways to pricing. With the fee Estimation ( PE scene) Christoph Breidert introduces a brand new technique to estimate WTP. it really works as an aditional interview scene appended to conjoint research and provides the respondents a dynamically generated series of product offerings with assigned costs.

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Extra resources for Estimation of Willingness-to-Pay: Theory, Measurement, Application

Sample text

In the following chapter willingness-to-pay will be defined more closely. At this point it is only important to know that willingness-to-pay refers to the maximum amount of money a person is wiUing to pay for some product. The WTPs for the two products are known individually and the consumers behave as follows: 1. A consumer buys a product only if his or her willingness-to-pay is greater than the price of the product. When a consumer buys a product he or she realizes a surplus, which is the difference between the willingness-to-pay and the sales price.

Schmalensee, 1984) With this assumption Schmalensee (1984) numerically confirmed that the correlation between WTPs for different products influences the benefit of bundling strategies. If WTPs for two products are negatively correlated, that is one is high, the other one is low, or vice versa, bundled sales with optimal prices lead to higher profits. The structure of the variable costs of the products is also very important. An essential prerequisite for a bundling strategy is that the WTPs of the consumers are higher than the variable costs.

The discussion of the different methods clearly indicates that the best method that should be used does not exist. Rather it depends on the objective of the marketer. If costly methods can be applied and quick results are not of main interest, different pricing strategies can be tested with field experiments in real market settings. If estimations of willingness-to-pay are needed frequently, it can be more efficient to apply less time consuming and less costly surveying techniques. At the end of the chapter it will be demonstrated that within indirect surveying there is a method missing which has both the ability to estimate willingness-to-pay at the individual level based on each respondents information and exphcitly ehcits choice behavior during the interview.

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